TGIF and wow, what a Friday it has been. I have been watching First Republic Bank (FRC) since March 2023, when the news of some of the commercial banks being in trouble broke out. The $FRC stock was trading at $123.00 back then and today it closed at an all-time low of just $3.51.

Today, CNBC reported that the bank was unable to work out a deal with the consortium of private banks like JP Morgan Chase, Citi etc. to continue its operations by receiving private capital infusion (on top of $30b already received) and FDIC may take the bank into receivership. FRB will be the 6th bank to fail this year, from the list of banks reeling under the interest rate implications.

Now, why am I mentioning this financial news in a real estate forum? It's because FRC is no small bank. At the end of FY 2022, FRC had over $200b of AUM (Assets under management). When a bank of this size and scale goes under, there are reverberations and it affects everything in the financial world and real estate is indeed one part of the financial world. To bring the inflation under control, the Federal reserve has been on a mission of tightening the monetary policy and it is causing all sort of troubles in the markets. The fast pace of increases in the interest rate, has caused a lot of leveraged and not-so-well managed institutions to go under. This in-turn, is causing the banks to pull back on the lending while the interest rates keep on going up. Eventually, the credit is getting even harder to obtain and since the interest rates have increased, it's gotten more expensive to get mortgages etc.

And this is exactly why this news affects us. This turmoil in the financial market is going to create further distress in lending and tighten the screws in the residential and commercial mortgage markets. As professionals in real estate, we need to be vigilant about the events and have an informed opinion of the repercussions. This is how we can educate our customers and clients and help them make good decisions.

Have a great weekend!

P.S. I did not publish this post and just checked for an update @ $FRC and Reuters is reporting that FDIC is ready to seize the bank. The stock has now dived down to $1.62!

https://www.reuters.com/business/finance/us-regulator-set-take-over-first-republic-source-2023-04-28/