Sometimes the slogans are written with good intentions and then they are like betrayals.
“It is a privilege to serve you,” says the First Republic Bank motto. The shares of this entity, the one that is most in danger after the financial turmoil last month, sank more than 40% this Tuesday after learning that clients have withdrawn an astonishing amount of 102,000 million in the first quarter. dollars in deposits. This is well over half of the 176,000 million available on December 31.
The deposits at the end of the initial quarter of 2023 include the temporary injection of 30,000 million that it received from eleven large banks in the United States to avoid its fall.
The earnings report for this period detailed the precarious situation the bank finds itself in after the massive withdrawal of funds.
During this same period, the First Republic borrowed $92 billion, mostly from the Federal Reserve (Fed or US central bank) or government-backed loan groups. They have essentially replaced their deposits with loans.
It's a dangerous course for any bank, which typically works by taking customer deposits relatively cheaply while lending money to home and business buyers at much higher interest rates.
This bank is still making some money. In his report he indicated that in this quarter he registered profits of 269 million. However, if compared to the same period in 2022, this figure represents a drop of 33% compared to earnings of 401 million.
Revenues have fallen 13%, to 1,200 million. But most of that quarter took place before the foreclosures on deposits forced the bank to take out those expensive Fed or executive-backed loans.
The fall in the value of the shares only aggravates its collapse, since its decline has reached 90% in the value of the titles since the middle of last March.
"We are working on restructuring our balance sheet and reducing expenses and short-term borrowing," Neal Holland, First Republic's chief financial officer, said Monday in a statement read at a conference where executives They refused to answer questions.
As they explained trying to show calm, the exodus of deposits stopped in the final week of March. From the last day of that month and until April 21, the bank only lost 1.7% of its deposits and most of this withdrawal responded to the payment of tax payments by its clients. The great disaster was caused by the earthquake that caused the Silicon Valley Bank to be taken over by the Administration.
