[Economics] First Republic plummets 49% after confessing to a large deposit flight

[#Wittels-]

The sinking has set off the alarms and the risk of public intervention reappears

The US bank First Republic Bank acknowledged on Monday that it was against the ropes in the March banking crisis due to a deposit flight and is once again in the eye of the hurricane. This Tuesday it has lost practically half of its value on the stock market, already very depressed due to the collapse suffered since February. The shares have fallen 49% in the session after the presentation of the entity's quarterly results. The collapse has set off alarm bells from the financial authorities and the risk of public intervention reappears when the banking storm seemed contained.

First Republic CEO Mike Roffler turned his back on analysts and refused to answer analyst questions Monday after presenting the results. In the figures published, the bank recognized that in a single quarter, customers withdrew 58% of deposits, 102,000 million dollars (about 92,000 million euros) of the 176,400 million dollars they had in the entity in December 2022. .

Roffler announced that the San Francisco-based bank has launched an adjustment plan that will entail the dismissal of 20% to 25% of the workforce of some 7,200 employees and cuts in the remuneration of its managers. He also said that he would reduce the size of his balance sheet and opened the door to some strategic operation such as the sale of assets or a capital increase.

Roffler's words have not convinced investors. After knowing the accounts, the shares of First Republic have once again collapsed on the stock market. What happened on Monday in the hours after the formal closing of the session has been confirmed this Tuesday with the open market. The price had already sunk 89% since the beginning of February. Now it falls 93% so far this year.

The bank's new stock market crash may revive the banking crisis that seemed contained and lead to an emergency solution and even the intervention of the bank by the authorities. Bad news about the financial state of the entity can accelerate the flight of deposits, leaving it without options for survival.

The bank was contaminated by the fall of Silicon Valley Bank (SVB) and Signature Bank. First Republic is the bank that most resembled SVB. He admits he suffered an “unprecedented” deposit leak. It contained the crisis thanks to the fact that the large US entities, led by JP Morgan, rescued it with 30,000 million dollars in deposits, with which it ended the quarter with 104,474 million. It also had to look for other ways to reinforce liquidity, including appealing to the Federal Reserve.

 

The bank ensures that deposit activity began to stabilize from the week of March 27, 2023, and has remained stable until Friday, April 21, 2023. “Total deposits amounted to $102.7 billion as of March 21. April 2023, only 1.7% less than on March 31, 2023”, it indicates. It also acknowledges that its cash position has risen from $34 billion in mid-March to $10 billion today.

First Republic's benefits fell 33% in the first quarter, to 269 million dollars, according to the accounts published this Monday at the close of the market by the entity. His income was also reduced.

 

Link: https://elpais.com/economia/2023-04-25/first-republic-se-desploma-un-49-tras-confesar-una-gran-fuga-de-depositos.html