Shares of First Republic dropped sharply on Friday as hopes dimmed for a rescue deal that could keep the bank afloat. Sources told CNBC David Faber that the most likely outcome for the troubled bank is for the Federal Deposit Insurance Corporation to take it into receivership. The stock was down 20% after being halted for volatility. The stock has fallen more than 90% this year as investors have lost confidence in the bank after two regional lenders failed in March.
There is still hope for a solution that doesn’t include receivership, sources told Faber. First Republic told Faber on Friday that “we are engaged in discussions with multiple parties about our strategic options while continuing to serve our clients.” CNBC reported on Wednesday that First Republic’s advisors were preparing to pitch larger banks on a plan that would let the regional lender sell bonds and other assets at an above-market rate and then raise equity. The sales would result in a loss for the banks that buy the bonds, but could be cheaper long-term than letting the bank fail and get seized by regulators. Reuters reported on Friday that U.S. officials — including from the FDIC, Treasury Department and Federal Reserve — are coordinating meetings with other banks to broker a rescue plan for First Republic.
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