Fresh fears for First Republic as shares plummet after losing over $100bn in deposit outflows
Shares in embattled lender First Republic slumped nearly 30 per cent today after it reported last night that it had lost around $100bn in deposits in the first quarter.
The massive deposit flight represented more than half of its pre-crisis total and exceeded analyst expectations, raising fears that the bank is not yet out of the woods.
While First Republic said an emergency $30bn injection from some of the US’s largest lenders – including JP Morgan and Wells Fargo – had helped to moderate the outflows, it had not yet recovered any of the fleeing funds.
First Republic’s profit fell by more than a third to $229m in the period. It said it would lay off around a quarter of its workforce in the next couple of months to cut costs.
First Republic had been hit hard because it had a higher share of uninsured deposits than many of its rivals.
However, the bank reported that its share of uninsured deposits had dropped to 27 per cent from 68 per cent reflecting customers’ concerns that they could lose everything.
“With the closure of several banks in March, we experienced unprecedented deposit outflows…We are working to restructure our balance sheet and reduce our expenses and short-term borrowings,” Neal Holland, the bank’s chief financial officer, said.
The San Francisco-based lender was one of the worst hit banks in the aftermath of Silicon Valley Bank’s (SVB) collapse with many concerned that it would be the third bank to fail following SVB itself and Signature Bank.
While many smaller banks reported deposit outflows, First Republic’s were much worse than many of its peers. Larger banks, however, have benefited as wary customers search for stability, with JP Morgan reporting $37bn of inflows in the first quarter.