Banking fears return in the US: the First Republic Bank share collapses 20% due to deposit outflows

A branch of the First Republic Bank in Santa Monica, California, USA. (Lauren Justice /)

The actions of First Republic Bank (FRC) fell as much as 20% late Monday and early Tuesday after the lender released its first quarterly results since the recent banking crisis.

The San Francisco-based financial institution reported that deposits fell by $72 billion in the quarter. Last month, a consortium of the biggest US banks banded together to bail out the lender with $30bn of uninsured deposits to prevent a run on deposits; Excluding these deposits, First Republic saw more than $100 billion flow out of the bank in the first quarter.

Revenue for the quarter was $1.2 billion, down 13.4% from the same period a year earlier, but above estimates of $1.12 billion. Earnings per share for the first quarter were $1.23, versus Wall Street expectations of 85 cents.

united states banks
The performance of the index that groups bank shares is well below the rest of the market. And First Republic stock loses 85% for the year. Source: Reuters

The bank also said it plans to cut 20-25% of its workforce in the second quarter of this year, while the bank is “looking at strategic options to accelerate its progress while bolstering its capital position.”

“With our deposit base stabilizing and our credit quality and capital position strong, we continue to take steps to strengthen our business,” read a joint earnings release from Jim Herbertfounder and CEO, and Mike RofflerCEO and Chairman of First Republic.

The shares of other regional banks, PacWest Bancorp and Western Alliance Bancorp, fell 2.9% and 2.5%, respectively. First Republic stock loses 85% of its value so far this year and the banking sector generally underperforms market indices.

“The problem for First Republic and the banking group in general is how little progress the bank has made,” he said in a note. Mike O’Rourke, Chief Market Strategist at JonesTrading. “Regional banks performed poorly last week, and this will only remind investors that there are still material risks.”

cursed march

Last month, three prominent banks fell from grace and rocked the global market. Silicon Valley Bank was the most notorious, due to its key role in financing the burgeoning US technology sector, but it also scared investors and depositors into closing SignatureBank and the collapse, with subsequent purchase by UBS, of the Swiss giant Credit Suisse.

Doubts about the health of banks in core countries no longer terrify markets, but they are far from gone. Investors are closely following developments regarding the stability of deposits in small and medium-sized banks.

Among the large banks, according to Reuters data, deposit outflows are still between slight and nil in the first quarter of the year. At JPMorgan Chase, total deposits rose 2% to $2.38 trillion. At Bank of America total deposits decreased 1% to 1.91 trillion, Citigroup total deposits decreased 3% to 1.33 trillion, at Wells Fargo total deposits decreased 2% to 1.36 trillion and at Goldman Sachs Group, total deposits fell 3% to $375 billion.

This week, even, a worrying data was added that came from Europe when in a report of results lower than expected due to the incorporation of a new tax on banks in Spain, the giant Santander also reported a reduction of around 5 % on your deposits.

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