First Republic Bank shares plunged today as investors reacted to financial disclosures from the bank.
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First Republic Bank shares plunged today as investors reacted to financial disclosures from the bank.
NurPhoto/Getty Images
It’s been a tough day on Wall Street for First Republic Bank as investors sold their shares as soon as possible in light of financial disclosures earlier this week.
On Monday, First Republic released its earnings report for the first three months of the year, and the results surprised Wall Street.
The California-based lender said it lost more than 40% of its deposits in March as clients moved billions of dollars elsewhere.
In a statement, Chief Financial Officer Neil Holland called these deposit outflows “unprecedented.” “First Republic’s profitability has been severely compromised,” said Susan Ross Katzke, an analyst at Credit Suisse Bank.
At some point during the trading day, the stock fell below $5. Just six months ago, First Republic stock was trading near $150.
Like Silicon Valley and Signature banks, First Republic, founded in 1985, catered to wealthy individuals, many of whose deposits were too large to be insured by the Federal Deposit Insurance Corporation (FDIC).
After the failures of Silicon Valley Bank and Signature Bank, the federal government virtually insured all deposits at these two banks, but regulators have pledged to back uninsured deposits across the board. did not.
As of March 31, First Republic’s proportion of uninsured deposits had shrunk to 27% of total deposits, the bank said.
First Republic shares plummeted on Tuesday, and trading became so volatile Wednesday that the New York Stock Exchange halted trading in bank shares an alarming eight times.
For weeks, First Republic tried to reassure customers and investors, to no avail.
Shortly after Silicon Valley Bank and Signature Bank collapsed, First Republic began raising additional funding from the Federal Reserve and JPMorgan Chase. Then, on March 16, 11 of the largest US banks offered his $30 billion lifeline.
That consortium, which includes Goldman Sachs and Wells Fargo, agreed to deposit $30 billion with the First Republic.
“This action by America’s largest bank reflects their trust in First Republic and banks of all sizes, and demonstrates their overall commitment to helping banks serve their customers and communities. “Regional, medium and small banks are critical to the health and functioning of the financial system,” the banks said in a statement.
Financial regulators, including the Federal Reserve and the FDIC chairman, applauded the move.
“This expression of support by a large banking group is very welcome and shows the resilience of the banking system,” they said in a short statement.
The First Republic on Monday said deposits had stabilized shortly after the announcement, but investors remained concerned about the bank’s long-term viability.
“We are working to restructure our balance sheet and reduce expenses and short-term borrowings,” Chief Financial Officer Neil Holland said in a statement.
First Republic has announced plans to cut costs in the coming months by laying off 20-25% of its workforce and reducing its real estate holdings.
In a call with Wall Street analysts, Chief Executive Mike Loeffler said he was in close contact with state and federal regulators.
