American bank First Republicwhich caters mainly to affluent customers, is now in the spotlight as fears are raised that it will be the next in a domino of collapses in the US.

The bank’s stock was down 20% at the midpoint of today’s session on Wall Street. Yesterday it recorded losses of 21% while since March 8 it has lost 73% of its value. The plunge was even greater, reaching 36%, after Bloomberg reported that First Republic is currently considering “strategic options” for its future, including a possible sale.

The stock rebounded slightly after the Wall Street Journal cited reports that other major banks, including JPMorgan Chase and Morgan Stanley, are trying to help First Republic and are discussing various alternatives, including raising its equity capital. And then it started taking profits after CNBC reported that “banks” were ready to lend it $20 billion.

It provides private banking services for individuals and companies and manages assets, having offices mainly in California but also on the East Coast (New York, Massachusetts, Connecticut, Florida), as well as in the States of Oregon, Washington and Wyoming.

In short, it “has an affluent clientele, mostly concentrated in the urban areas” of both US coasts, according to Eric Compton, an analyst at Morningstar.

Risk of deposit leakage

Until mid-2021 it was run solely by its founder, Jim Herbert, who has now ceded his position to general manager Mike Roeffler but remained chairman of the board.

It registered remarkable growth, from year to year: at the end of 2010 its assets amounted to 22 billion dollars but at the end of 2022 it will reach 212 billion dollars.

The profile of its affluent clientele, however, turned into a weakness, following the bankruptcies of Silicon Valley Bank, Signature Bank and Silfergate, banks that had invested in specific financial activities – SVB in technology, cryptocurrencies the other two.

According to S&P Global Ratings, 68% of deposits at First Republic are in accounts that exceed $250,000, the amount guaranteed by the authorities. Although its customers come from a variety of sectors, some analysts fear that many will prefer to move their money to larger banks that are not at risk of failure, precisely because they are so important that regulators will not allow them to collapse.

The bank said as of Sunday that it had “enhanced” its liquidity and had $70 billion at its disposal, thanks to the facilities offered to it by the Federal Reserve and JPMorgan Chase. This amount, however, is considered insufficient by the rating agencies S&P Global Ratings and Fitch, which on Wednesday downgraded its credit rating by dropping it into the “junk” category.

“We believe the risk of deposit leakage is high for First Republic Bank, despite the actions taken by banking regulators and the fact that the bank is increasing its lending capacity to limit the risk associated with last week’s failures,” S&P said in its reasoning.