New York, April 25 (BNA): First Republic Bank shares fell today, Tuesday, after it was announced that depositors withdrew more than $100 billion during the crisis last month, amid fears that it may be the third bank to collapse after the financial crisis. The Collapse of Silicon Valley Bank and Signature Bankreported the Associated Press (Associated Press).
The San Francisco bank said late Monday that it was only afterward that it was able to stem the bleeding And a group of big banks stepped in to save him By depositing $30 billion in unsecured deposits. But investors remained deeply skeptical about the direction First Republic should take either as a standalone company or as an acquisition target. It is likely that the bank will make lower profits for years, and if the bank is bought out, any purchase would result in an immediate loss for any buyer.
The bank says it plans to Sale of unprofitable assets, including the low-interest mortgages he made to wealthy clients. It also announced plans to lay off up to a quarter of its workforce, which totaled about 7,200 employees, at the end of 2022.
“With a still significant level of uncertainty in expected results and losses beyond next year, we recommend investors sell stocks as the outlook seems highly uncertain,” Citi analyst Arin Ciganovich said in a note to clients.
First Republic has struggled since the collapse of Silicon Valley Bank and Signature Bank in early March, as investors and depositors grew concerned that the bank might not survive as an independent entity for much longer. Shares of the bank are trading at $9.19, a fraction of the price it was a year ago when it traded at about $170 a share.
Prior to the failure of Silicon Valley Bank, First Republic had a banking franchise that was the envy of most of the industry. Its clients, most of whom were rich and powerful, rarely defaulted on their loans. The bank made much of its money by offering low-cost loans to the wealthy, which reportedly included Meta Platforms CEO Mark Zuckerberg.
But its privilege became a commitment when bank clients and analysts noticed that the vast majority of First Republic deposits, like those in Silicon Valley and Signature Bank, were uninsured — well above the $250,000 limit set by the FDIC. If First Republic fails, depositors run the risk of not getting all of their money back.
First Republic reported first-quarter results on Monday that showed it had $173.5 billion in deposits before the Silicon Valley bank failure on March 9. On April 21, it had $102.7 billion in deposits, including $30 billion deposited by major banks. It said its deposits had been relatively stable since late March.
The bank said its profits fell 33 percent in the three-month period ended March 31 compared to a year earlier, and revenue fell 13 percent.
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