First Republic Bank shares tumble as deposits plunged 41% amid banking crisis

Without the combined $30 billion provided by America's largest banks, decline would have been about $102 billion

A television screen displays the stock price of First Republic Bank inside one of its branches in New York's Financial District. AP

Shares of First Republic Bank plunged more than 22 per cent in after-hours trading even as the San Francisco-based lender said it was taking steps to shore up its balance sheet and cut its workforce after its deposits plunged in the first quarter amid financial turmoil at US mid-sized banks.

Deposits fell to about $104.5 billion in the first quarter of this year from $176 billion in the fourth quarter of 2022 even after First Republic received a $30 billion lifeline from Bank of America, Citigroup, JPMorgan Chase and Wells Fargo, it said in an earnings statement on Monday.

Without the combined $30 billion provided by America's largest banks, First Republic's decline in deposits would have been almost $102 billion during the March banking crisis after the collapse of Silicon Valley Bank and Signature Bank that sparked a run on the lender.

As of March 9, 2023, just before the collapse of Silicon Valley Bank that sparked a banking crisis in the US, First Republic's total deposits were $173.5 billion, 1.7 per cent less than what they were at the end of 2022.

First Republic said it began to experience unprecedented deposit outflows on March 10 but things began to stabilise after it received the $30 billion on March 16. The unsecured deposits from the banks allowed First Republic to reduce its short-term borrowings and total deposits were $102.7 billion as of April 21, 2023.

“With the stabilisation of our deposit base and the strength of our credit quality and capital position, we continue to take steps to strengthen our business,” Jim Herbert, First Republic's executive chairman and Mike Roffler, the chief executive, said in a joint statement on Monday.

Shares of the bank had closed up 12.2 per cent to $16 a share, but then fell 22.19 per cent in after-hours trading as investors took stock of the first-quarter results and weighed the potential effect of the cost of funding increasing for the bank as the Fed continues to raise interest rates to their highest level since 2007.

Shares of First Republic were down more than 87 per cent since the start of this year as of Monday’s market close.

First Republic said it was taking actions to strengthen its business and restructure its balance sheet.

These actions include increasing insured deposits, reducing borrowings from the Federal Reserve Bank, and decreasing loan balances to correspond with the reduced reliance on uninsured deposits.

First Republic said the actions it is taking and has planned will help it reduce the size of its balance sheet as well as its reliance on short-term borrowings, and address the challenges it continues to face.

The bank is also taking steps to reduce expenses, which includes significantly reducing executive officer compensation, condensing corporate office space and reducing non-essential projects and activities.

First Republic said it also expects to reduce its workforce by approximately 20 to 25 per cent in the second quarter and is “pursuing strategic options to expedite its progress while reinforcing its capital position”.

Earlier this month First Republic said it will suspend payments of quarterly cash dividends on its preferred stock "as a measure of prudent oversight."

It suspended its dividend on common stock last month after the collapse of Silicon Valley Bank.