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First Republic Bank jumps on report the lender is working on a rescue plan to avoid being taken over by the government

A pedestrian walks by a First Republic bank on April 26, 2023 in San Francisco, California.First Republic stock has plummeted after Silicon Valley Bank’s failure.

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  • First Republic Bank shares rose Friday after the Financial Times reported the lender is working on a plan to stave off a FDIC takeover. 
  • There’s been a tone shift among advisors to the bank from earlier this week when the stock sank 65%.
  • It’s still possible the FDIC will seize the bank that lost $100 billion in deposits in Q1. 

First Republic Bank shares pushed higher Friday after the Financial Times reported the lender is working on a plan to prevent being seized by the Federal Deposit Insurance Corporation. 

The stock ran up as much as 13.5% to $7.03 in premarket trade then trimmed the advance to 7%.

Advisors at the California-based lender, which lost $100 billion in deposits in the first quarter, are working on a private-sector plan to stave off the potential of a takeover by the FDIC, the report said. 

Three unnamed sources told the British publication there’s been a shift in tone among the bank’s advisors compared with Tuesday and Wednesday when the bank’s stock slid 65% and fears about an FDIC takeover grew. 

The advisors were asking banks to purchase bonds from First Republic at above-market rates, allowing the bank to shrink its losses. But sources told the FT that such a move may not be sufficient enough to stabilize First Republic on its own and that it’s still possible the FDIC will seize the bank. 

JPMorgan is involved in the talks but other large institutions may participate in another rescue plan for First Republic, the report said, adding that JPMorgan has been acting as First Republic’s banker. 

The advisors are eager to win approval from Biden administration officials for a plan that can keep the bank, which caters to wealthy clients, running.

The FT report said the White House, US Treasury and FDIC declined to comment. JPMorgan and Lazard, which is also working with First Republic, also declined FT’s comment requests.  

First Republic shares have plunged 95% this year through Thursday’s session in the wake of the banking industry shakeup spurred by the collapse and seizures of Silicon Valley Bank and Signature Bank last month. 

CNBC on Wednesday reported that First Republic’s advisors were pitching the bond-buying idea to larger rivals, making the case that if the bonds weren’t purchased by them, they may be on the hook for FDIC fees of about $30 billion should First Republic fail. 

JPMorgan along with other banks chipped in last month for a $30 billion deposit infusion into First Republic. 

First Republic shares on Wednesday logged a record-low close of $5.69. 

Read the original article on Business Insider