Previously, First Republic Bank was famous in the US banking system for owning a chain of franchised banks and having a customer base that was mainly rich and powerful people (said to include Facebook’s Mark Zuckerberg). First Republic Bank has a very large source of deposits at very low costs.
Even when SVB and Signature Bank collapsed in early 2023, First Republic Bank still had no overdue loans of more than 90 days thanks to its very high-quality customer group.
World financial markets in an unpredictable decade
The world financial market is falling into an extremely unpredictable period with uncertain fluctuations, from high inflation on a global scale, sharp increases in commodity prices, gold and silver with no end in sight until now. The phenomenon of many types of assets increasing and decreasing unexpectedly.
A huge amount of money has been pumped out by countries over the years, due to the Covid-19 pandemic, causing many types of assets including stocks, real estate, gold, cryptocurrencies… to increase sharply and potentially cause bubbles. The ball is in danger of collapsing.
If First Republic Bank went bankrupt in May 2023 due to high interest rates and a sharp decline in the US stock market, then at the present time Republic First Bank is also bankrupt due to high interest rates but real estate prices plummeted.
According to assessment reports, Republic First Bank went bankrupt because the bank was under pressure from high costs and reduced profit margins. This bank had to cut jobs and abandon the home loan segment.
Republic First Bank encountered many difficulties when interest rates increased, while commercial real estate values decreased. Office buildings in the US have a very high vacancy rate after the pandemic. These are factors that cause banks to face increased financial risks. Debts secured by real estate depreciate, causing bad debt to increase.
Many local banks in the US like Republic First Bank are in uncertain times. When banks encounter difficulties, depositors can massively withdraw money at any time.
Bad news and waves bank run (withdraw money from banks) causing the world to face a new crisis. Meanwhile, gold prices have recently continuously increased sharply and repeatedly reached historical peaks thanks to the cash flow seeking shelter from the storm.
Many experts believe that the US banking sector will continue to face difficulties until the US Federal Reserve (Fed) cuts interest rates. Maintaining high interest rates will continue to cause more stress and the possibility of other banks collapsing cannot be ruled out.
However, it is difficult for the Fed to make a decision to cut interest rates because inflation is still high. Recently, many Fed officials have had the opinion of delaying the decision to cut interest rates, instead of expected in June, it may move to September, maybe even next year.
On Kitco, expert Andrew Axelrod said that the financial crisis has just begun. He emphasized that many banks have deep ties to the commercial real estate sector. Meanwhile, this sector is at risk of collapse due to the trend of remote working and businesses are shrinking operations.
Axelrod predicted that economic instability could bring gold to $3,000/ounce in 2024. He said that “$3,000/ounce is not crazy”. Recently, central banks of many countries push to buy gold. This trend is likely to continue.
