SAN FRANCISCO–A newly released earnings report reveals approximately $100 billion in deposits was withdrawn by customers of First Republic Bank in March as concerns grew over its financial condition.
To keep the bank afloat and stem the panic, some $30 billion was deposited by other mega-banks, including JPMorgan Chase.
The tactic has worked for now, albeit with First Republic’s fate remaining precarious, as it remains operating and didn’t join the likes of Silicon Valley Bank and Signature Bank in failing. The bank said it paid between 3% and 4.9% on loans from the Fed and FHLB in the quarter, on average.
According to First Republic’s first quarter earnings report, deposits fell more than 40% to $104.5 billion at the end of the first quarter, from $176.4 billion on Dec. 31. Its profits plunged 33% in the first quarter to $269 million from $401 million a year earlier, while revenue dropped 13% to $1.2 billion.
‘Came Back to Earth’
“Most of the quarter happened before the deposit run forced the bank to take on expensive loans from the Federal Reserve and Federal Home Loan Bank, which is likely to crimp future earnings,” noted the Wall Street Journal. “The bank’s highflying business came back to earth after the Federal Reserve began raising interest rates. Wealthy customers, no longer content to leave giant balances in bank accounts earning paltry interest, began to move their money into higher-yielding alternatives.”
First Republic shares have lost nearly 90% of their value since early March, and fell 20% in after-hours trading following the earnings report.
‘Working to Restructure’
First Republic is “working to restructure our balance sheet and reduce our expenses and short-term borrowings,” finance chief Neal Holland said in a statement quoted by the Journal.
The bank added it will reduce head count by 20% to 25% and slash executive pay.
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