First Republic shares erase gains as rescue-deal optimism wanes

(Reuters) -Shares of First Republic Bank (NYSE:) dipped in the early hours of trading on Friday, reversing earlier gains as investors digested news of a potential rescue deal brokered by the U.S. government.

The Federal Deposit Insurance Corporation (FDIC), the Treasury Department and the Federal Reserve are among government bodies that have started to orchestrate meetings with financial companies about a lifeline for the bank, Reuters reported earlier on Friday.

The government’s involvement is helping bring more parties, including banks and private equity firms, to the negotiating table, one of the sources told Reuters.

Still, concerns remain that deposit declines at First Republic could worsen and spark a fresh meltdown in the U.S. banking industry even as it recovers from the collapse of two regional lenders last month.

First Republic earlier this week said its deposits had slumped by more than $100 billion in the first quarter.

Shares of the company were last down nearly 2% at $6.08, after rising as much as 6.6% earlier.

“The potential worst-case scenario stemming from the collapse of Silicon Valley Bank appears to have been averted,” said Mark Haefele, chief investment officer at UBS Global Wealth Management in a note.

“But the problems at First Republic are a reminder that further problems remain possible.”

The San Francisco-based lender’s stock has more than halved so far this week. Since the start of the year, it has lost nearly 95% of its value, making it the worst-performing stock.

Meanwhile, the Federal Reserve is set to publish an internal review of its supervision of Silicon Valley Bank on Friday, April 28 at 11 a.m. ET (1500 GMT).