First Republic Bank Collapse Risk in 2025: Shares Plunge Below $1 Billion Market Cap

First Republic Bank (FRC) is dangerously close to collapse in 2024, with its shares dropping to unprecedented lows following reports that the federal government and major banks are hesitant to initiate a rescue plan.

The bank experienced massive deposit withdrawals exceeding $100 billion in Q1, accounting for 40% of its total deposits. Without a crucial $30 billion uninsured deposit infusion from 11 leading banks in March, this outflow would have surpassed 50%.

Following these developments, FRC’s shares plummeted nearly 50% in a single day and declined an additional 30% subsequently. The bank's market capitalization dipped below $1 billion during intraday trading, a stark contrast to its $40 billion peak in November 2021. The price-to-earnings ratio dropped to a low of 0.7, triggering the New York Stock Exchange (NYSE) to halt trading 12 times on Wednesday due to extreme volatility.

Compounding the crisis, First Republic risks losing access to Federal Reserve lending facilities if a private bailout is not secured promptly. U.S. regulators favor a private rescue to avoid federal takeover, which could further strain the FDIC’s insurance resources.

Bank management is urgently negotiating with regulators and top banking executives to secure an additional financial lifeline. Efforts include exploring options such as transferring problematic assets to a 'bad bank' or selling assets above market value. However, other banks are cautious about intervention due to potential losses on uninsured deposits and may prefer FDIC involvement.

The bank’s troubles began shortly after the collapse of Silicon Valley Bank and Signature Bank in March, as First Republic held the third-largest share of uninsured deposits exceeding the FDIC’s $250,000 insurance limit.

Since the initial collapse of SVB and Signature Bank, FRC shares have fallen over 60% in the first trading session and continue to decline, down more than 95% year-to-date.

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