Customers of First Republic Bank pulled greater than $100 billion in deposits out of the bank during last month’s crisis, as fears swirled that it might be the third bank to fail after the collapse of Silicon Valley Bank and Signature Bank.
San Francisco-based First Republic said Monday that it was only after a bunch of huge banks stepped in to save lots of it by depositing $30 billion in uninsured deposits that the bank was capable of staunch the bleeding.
The bank said it now plans to dump assets and restructure its balance sheet, and said it also expects to put off as much as 1 / 4 of its workforce, which totaled about 7,200 employees at the top of 2022.
First Republic reported first-quarter results Monday that showed it had $173.5 billion in deposits in early March before Silicon Valley Bank failed on March 9. On April 21, it had deposits of $102.7 billion, including the $30 billion the massive banks deposited. It said since late March, its deposits have been relatively stable.
“We proceed to take steps to strengthen our business,” Jim Herbert, the bank’s executive chairman and Mike Roffler, the bank’s CEO, said in a joint statement.
Before the failure of Silicon Valley Bank, First Republic had a banking franchise that was the envy of many of the industry. Its clients, mostly the wealthy and powerful, rarely defaulted on their loans. The bank made much of its money making low-cost loans to the wealthy, which reportedly included Meta Platforms CEO Mark Zuckerberg.
Even through this crisis, the bank’s book of loans greater than 90 days late was zero.
First Republic made much of its money making low-cost loans to the wealthy, which reportedly included Meta Platforms CEO Mark Zuckerberg.REUTERS
But its franchise became a liability when bank customers and analysts began specializing in the proven fact that the overwhelming majority of First Republic’s deposits, like Silicon Valley and Signature Bank, were uninsured — that’s, above the $250,000 limit set by the FDIC — which implies that if First Republic were to fail, its depositors may not get all their a reimbursement.
The bank’s profits fell 33% from a 12 months earlier, in keeping with its earnings, and revenues were down 13%.
