First Republic Down 20%+ After-Hours as Bank Reveals 40% Deposit Drop in Q1
The shares of First Republic Bank fell more than 20% in after-hours trading on Monday, April 24th, after the company disclosed that its deposits fell more than 40% in the first quarter—significantly more than was forecast. While the bank also stated that the situation is stabilizing, it also hinted it is exploring “strategic options” to speed up recovery.
FRC Down 20%+ After Reporting Atrocious Deposits in Q1
After First Republic Bank filed its first quarter results on Monday, its shares dropped more than 20% in after-hours trading erasing the day’s 12.20% gains. While the bank managed to beat estimates for earnings and revenue, its deposits were significantly worse than was forecast.
According to First Republic, its first-quarter deposits stood at $104.5 billion—40% lower than in Q4, 2022. Additionally, while the bank stated that the situation has somewhat stabilized since the end of Q1, it disclosed it is “pursuing strategic options”, cutting executive compensation, and reducing its workforce by 20-25%.
As for the revenue itself, the bank ended the quarter with $1.21 billion as opposed to the expected $1.15 billion. Furthermore, its per-share earnings were significantly better than forecast and stood at $1.23 and not $0.85. First Republic has been facing hardship since early March when the US bank crisis started.
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First Republic and the March Crisis
The first weeks of March saw the downfall of three major US banks and initiated what has widely been described as a banking crisis of confidence. After struggling for several months in the wake of the collapse of FTX, Silvergate Bank, a major crypto-friendly bank, announced its liquidation on March 8th. Over the following five days, two more banks—Silicon Valley and Signature—were closed by US financial watchdogs.
The closings forced the FED to implement emergency measures in order to stabilize the situation, but the revelation that the US banks were using the discount window to borrow at rates unseen since 2008 only deepened the crisis of confidence. By March 16th, First Republic, an important regional bank, appeared in danger of becoming the fourth to collapse.
By that Friday, First Republic received $30 billion in rescue deposits from other major banks in a show of support. The move, however, had a negative impact on its share price as many investors interpreted the move as a sign that the situation was worse than reported. While the bank itself reported on Monday that the situation is stabilizing, it undoubtedly took a beating in 2023 and its stock is down nearly 87% YTD.
Editorial note (April 25th, 2023, 11:03 AM EST): A number in the first subheading was corrected.
Do you think First Republic’s Q1 report could reignite the banking crisis in the US? Let us know in the comments below.