First Republic loses over US$100 billion in deposits after Silicon Valley Bank collapse
- The bank is exploring options as the news overshadowed its market-beating first-quarter profit and sent shares down 21 per cent
- First Republic came into intense focus after the SVB and Signature Bank closures prompted US customers to move billions of dollars to bigger institutions.
First Republic Bank’s deposits fell by over US$100 billion in the first quarter and it said it was exploring options including restructuring its balance sheet, overshadowing market-beating profit and sending its shares down 21 per cent after the bell on Monday.
The results mark the most important quarter for the troubled bank as it prepares to increase insured deposits, cut borrowings from the Federal Reserve Bank and loan balances, it said, while aiming to lay off nearly 20-25 per cent in the second quarter.
“We’re taking steps to meaningfully reduce our expenses to align with our focus on reducing the size of the balance sheet,” an executive said in a post-earnings call, which ran for less than 15 minutes and ended without executives taking questions.
First Republic came into intense focus after Silicon Valley Bank (SVB) and Signature Bank collapsed last month, shaking the confidence in US regional banks and prompting customers to move billions of dollars to bigger institutions.
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“With the closure of several banks in March, we experienced unprecedented deposit outflows,” Chief Financial Officer Neal Holland said.
Deposits fell to US$104.47 billion from US$176.43 billion in the fourth quarter despite the lender getting a US$30 billion lifeline in combined deposits from US banking behemoths, including Bank of America Corp., Citigroup Inc., JPMorgan Chase & Co and Wells Fargo & Co.
Excluding the help from major banks, the decline in deposits was almost US$102 billion.
Still deposit activity began to stabilise in the week of March 27 and has remained stable through April 21, the company said.
The lender earned US$1.23 a share in the first three months ended March, comfortably above 85 cents analysts estimated for the quarter, according to Refinitiv data.
The results showed the extent of damage on the stabilisation of First Republic after last month’s crisis. The lender was seen as vulnerable after the failures of SVB and Signature fuelled concern of a panic spreading through the financial system.
It also faces a difficult path to revive its fortunes, banking analysts and industry experts say.
For years, it lured high-net-worth clients with preferential rates on mortgages and loans, making it more vulnerable than regional lenders with less-affluent customers. Its loan book and investment portfolio also became less valuable as interest rates rose.
