June 2, 2023

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Shares of First Republic Bank lost 50% in one day

Shares of First Republic Bank lost 50% in one day

Shares of First Republic Bank lost more than 50% of their value during Tuesday’s trading in what appeared to be a resumption of the crisis experienced by some US regional banks last month, avoiding a slump after losing 40% of its deposits in the first quarter of the year.

Shares of the bank, which was founded in 1985, traded at less than $8 on Tuesday, bringing its losses back to more than 90% in the past year alone from a high of $167 in April last year. Silicon Valley and Signature Bank, more than other banks, were hit harder last month by the fallout from the collapse.

Yesterday, Monday, the bank revealed some shocking details about the turmoil in its business, but its executives did not elaborate much during a press conference they held to discuss first-quarter business results with Wall Street analysts.

Officials spoke for just 12 minutes, giving prepared remarks and refusing to answer questions, leaving investors and reporters unconvinced.

The bank has borrowed $92 billion in the past two months, mostly from the Federal Reserve and a group of government-backed banks, replacing withdrawn deposits with loans, which analysts say is a risky path for any bank.

In the quarter ended, the bank made some limited profit, estimated at about $269 million, a third of what it earned in the previous year. Lenders, financial institutions and investors fear the world’s largest economy could enter a recession. And a decline in home prices and sales in the near term.

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“When a bank feels limited in its options, it starts by its own rules,” said Timothy Coffey, banking analyst at Caney-Montgomery Scott Banking.

Coffey said First Republic Bank, which serves wealthy Americans, lost more than half of the $176 billion it had at the end of the year after losing $102 billion in customer deposits in the first quarter of the year. Last year.

Bank officials, on the other hand, defended him, insisting that the outflow of deposits outside the bank had stopped significantly compared to the previous period, saying, “In the first three weeks of April, the bank lost only 1.7% of its deposits. Most of that was related to paying taxes to customers.”

In other reassuring statements, First Republic Bank’s chief financial officer, Neil Holland, stressed that “the bank saw an unprecedented influx of deposits last March as several banks closed, and they are working to restructure the balance sheet.” Reducing costs. and short-term credit.

According to some press sources, US banking giant J&P Morgan has prescribed strategic alternatives to solve First Republic Bank’s crisis, such as raising capital or trying to sell some assets.

The bank’s financial results showed that its revenue for the first quarter of this year was $1.2 billion, down 15.9% from the previous quarter and down 13.4% from the same period in 2022.

Net interest income was $923 million in the first quarter, down 21.4% quarter-over-quarter and 19.4% year-over-year. respectively. Net profit for the first quarter was $269 million, down 32.9% compared to the same period last year.

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The turmoil at the bank began six weeks ago, when federal regulators shut down Silicon Valley and Signature, prompting customers to pull billions of dollars from smaller banks to bigger banks and money market funds.

First Republic is now considered the next in the domino matrix because it had a deposit system similar to the two failed banks, based primarily on the balances of many high-tech entrepreneurs, with a large percentage of deposits outside the FDIC’s regulatory limits. A quarter of a million dollars.