First Republic paid out $100bn during crisis

First Republic Bank, based in San Francisco, suffered a deposit exodus of over $100 billion during the recent financial crisis, triggering concerns that it could be the third bank to collapse following the failure of Signature Bank and Silicon Valley Bank. First Republic revealed that the situation only stabilised after a group of large banks deposited $30 billion in uninsured deposits to save the bank. However, the bank’s shares plummeted over 20% after gaining 12% on Monday.

First Republic’s stock has declined by 90% this year due to investor concerns about regional lenders’ stability since the Silicon Valley Bank and Signature Bank collapses. The bank plans to sell assets, restructure its balance sheet, and lay off up to a quarter of its workforce, which totalled about 7,200 employees at the end of 2022. Senior portfolio manager Ben Emons expressed his doubts about the bank’s ability to recover as it continues to suffer from deposit outflows.

First Republic’s first-quarter results showed $173.5 billion in deposits before Silicon Valley Bank’s collapse in early March. However, its deposits had dwindled to $102.7 billion by April 21, including the $30 billion deposited by the big banks. The bank reported stable deposits since late March and expressed its commitment to strengthening the business in a joint statement by Jim Herbert, the executive chairman, and Mike Roffler, the CEO.

Before the Silicon Valley Bank collapse, First Republic boasted an enviable banking franchise with a client base of mostly affluent individuals who rarely defaulted on their loans. However, this was seen as a liability when depositors and analysts discovered that most of the bank’s deposits, like those of Signature Bank and Silicon Valley Bank, were uninsured. As a result, depositors may not receive all their money back in the event of First Republic’s collapse, leading to a decline in profits by 33% from a year earlier and a 13% decrease in revenue. Analyst Adam Crisafulli noted that the bank’s earnings prospects remain bleak.