FRC Stock Alert: First Republic Is on the Brink of an FDIC Death


  • Shares of First Republic (FRC) stock plunged another 40% today.
  • This came amid reports the bank may be headed for FDIC receivership.
  • Banks have been asked to put forward bids as the FDIC looks for a market-driven solution.
FRC stock - FRC Stock Alert: First Republic Is on the Brink of an FDIC Death

Source: Below the Sky /

The top regional bank that’s in focus for most investors once again today is First Republic (NYSE:FRC). Shares of FRC stock are once again plunging today, down approximately 40% at the time of writing, on news that the bank is likely headed for Federal Deposit Insurance Corporation (FDIC) receivership.

In other words, the party is over for this bank. After the company said that it is “engaged in discussions with multiple parties about our strategic options while continuing to serve our clients,” investors clearly took the hint that any sort of comeback is unlikely, resulting in shares sliding violently lower. Accordingly, this stock was halted multiple times today for volatility, as selling demand greatly outpaced that of buyers.

On a year-to-date basis, FRC stock has now lost more than 95% of its value. Let’s dive into what this news could mean for investors in the broader banking sector overall.

Shares of FRC Stock Plunge Again

Reports have circulated that the FDIC is requesting that banks put forward bids to buy First Republic if it were to enter FDIC receivership. Accordingly, the implications here are strong. First Republic isn’t likely to make it, and now it’s a question of what other banks will pay to acquire the assets.

Regulators likely want to avoid taking a more active role in saving the bank, instead focusing on a market-driven solution to the issue. This would allow regulators to save face from a political standpoint (it’s not technically a bailout) and wouldn’t put the burden on taxpayers to cover the shortfall.

That said, shareholders in FRC stock will be the ultimate losers in this zero-sum game, with the ultimate impact unknown at this point. Now, questions about what this could mean for other regional banks considered too small to be saved (rather than too big to fail) are circulating.

Personally, the mid-sized regional banking sector is one I think is far more risky than it’s been in some time. Investors appear to share this view, with shares of several of First Republic’s peers trending lower today.

On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.

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