First Republic Bank Shares Drop 49% after Sharp Decline in Deposits in Q1 2023

UTC by Steve Muchoki · 3 min read
First Republic Bank Shares Drop 49% after Sharp Decline in Deposits in Q1 2023
Photo: Depositphotos

First Republic Bank received uninsured deposits totaling $30 billion from a group of America’s largest banks on March 16, 2023, to help reduce the chances of a bank run.

First Republic Bank (NYSE: FRC) shares dropped as much as 49.39 percent on Tuesday to close the day trading at $8.10. The $2.93 billion valued bank has seen its value shrink by more than 93 percent YTD, amid fears of a collapsing United States banking system. The recent capitulation in the FRC market wiped out all the gains made during the past decade. Notably, FRC shares reached an ATH of around $220 in late 2021.

Closer Look at First Republic Bank and Factors that Influence Its Shares

During the first quarter, First Republic Bank reported revenue of $1.2 billion, down 13.4 percent YoY. The company’s diluted earnings per share for the quarter came in at $1.23, down about 39 percent compared to the first quarter of 2022. Additionally, the company noted that its deposits for the first quarter came in at $104.5 billion, down 35.5 YoY. However, the company noted that borrowing spiked nearly 100 percent during the first quarter compared to last year’s.

Neal Holland, Chief Financial Officer of First Republic said:

“With the closure of several banks in March, we experienced unprecedented deposit outflows. We moved swiftly and leveraged our high-quality loan and securities portfolios to secure additional liquidity. We are working to restructure our balance sheet and reduce our expenses and short-term borrowings.”

Notably, First Republic Bank received uninsured deposits totaling $30 billion from a group of America’s largest banks on March 16, 2023, to help reduce the chances of a bank run. Additionally, the bank secured more liquidity from the Federal Reserve Bank and the Federal Home Loan Bank. Thereby increasing the Fed’s balance sheet by a few hundreds of billions.

The bank has, however, noted that deposits have stabilized, with a total of approximately $102.7 billion deposited as of April 21. Meanwhile, the First Republic Bank has taken several measures to reduce expenses, including significant reductions to executive officer compensation, and cutting down on non-essential projects. Additionally, First Republic Bank announced that it will reduce its workforce by approximately 20-25 percent in the second quarter to help cut down its expenses. The bank also announced that its common stock dividend program has henceforth been suspended.

Jim Herbert, Founder and Executive Chairman, and Mike Roffler, CEO and President of First Republic said:

“With the stabilization of our deposit base and the strength of our credit quality and capital position, we continue to take steps to strengthen our business. We remain fully committed to serving our communities, and we are grateful for the ongoing support of our clients and colleagues.”

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Steve Muchoki
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