First Republic Stock Plunges As Deposits Plummet In Q1

Shares fell 20% in after-hours trading after First Republic Bank said Monday that deposits plunged more than $100 billion in the first quarter and it was exploring options such as restructuring its balance sheet.

This sharp drop in deposits overshadowed the beleaguered bank’s better-than-expected quarterly earnings. First Republic managed to weather the crisis by injecting deposits from large US banks after two regional US lenders went bankrupt last month.

First Republic said Monday it plans to cut costs in the second quarter by cutting executive compensation, reducing office space and laying off about 20-25% of its workforce. It also aims to increase insurance deposits and reduce borrowing from the Federal Reserve.

Shares of First Republic (NYSE:FRC) closed 12.32 per cent higher at $16 during regular trading in New York on Monday. However, the announcement sent the stock down 21.81% to $12.51 in after-hours trading.

First Republic came under the spotlight last month after both Silicon Valley Bank (SVB) and Signature Bank went bankrupt. The collapse of these two regional banks shook confidence in US regional banks and prompted customers to shift billions of dollars to larger institutions.

$30 billion bailout from US banking giants including Bank of America (NYSE:BAC), Citigroup (NYSE:C), JP Morgan Chase (NYSE:JPM) and Wells Fargo (NYSE:WFC) Despite this, First Republic’s deposits declined from $176.43 billion in the fourth quarter to $104.47 billion in the first quarter.

Excluding the financial support from these major banks, the decline in deposits amounts to nearly $102 billion.

According to First Republic, deposits began to stabilize the week of March 27 and remained stable through April 21.

According to Refinitiv data, First Republic earned $1.23 per share for the quarter ended March, well above analysts’ expectations of 85 cents per share.

The extent of damage to the First Republic after the financial crisis last month, which sparked fears that a panic could spread throughout the financial system, is well reflected in these results.


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