First Republic Bank’s stock continued its collapse, losing 21% during Wall Street trading in today’s Wednesday session, bringing its losses to 90% in 3 consecutive sessions.
The bank’s market capitalization fell below $1 billion for the first time ever after reports that the US government was unwilling to get involved in the bank’s bailout.
Shares of First Republic Bank fell by 49% yesterday, after the bank announced a sharp decline in deposits, by more than $ 100 billion in the first quarter of 2023, which fueled concerns about the future of the bank and the safety of the American banking sector after the collapse of Silicon Valley Bank “SVB” and two others. Medium in size.
For his part, Tariq Al-Rifai, CEO of CMarkits London, expected a rescue operation for First Republic Bank, explaining that the bank’s problems have not been resolved, and the repercussions will continue.
Al-Rifai explained in an interview with Al-Arabiya that the banks’ losses came despite investing in safe tools, namely bonds, which were affected by the interest rate hike.
On Monday, US bank First Republic said its deposits fell 40.8% to $104.5 billion in the first quarter, which saw the collapse of two other medium-sized banks and raised customer concerns about widespread bank failures.
The First Republic’s deposit trip was worse than Wall Street expected, with analysts putting the figure at the end of the first quarter at about $145 billion, according to a consensus estimate from FactSet’s StreetAccount. Analyst deposit estimates ranged from $100 billion to $206 billion, according to FactSet.
The First Republic said deposit inflows have leveled off since then.
Deposit activity began to stabilize starting from the week of March 27, 2023, and remained stable until Friday, April 21, 2023. Total deposits reached $102.7 billion as of April 21, 2023, down only 1.7% from March 31, 2023, mainly. It reflects seasonal customer tax payments that occur in April.
The deposit figure for the end of March included $30 billion in term deposits from the 11 largest banks announced on March 16 in an effort to stabilize the broader banking system. If these deposits were excluded, First Republic deposits would have been reduced by more than 50%.
Yesterday, it was announced that the American First Republic Bank and its auditor, KPMG, would be sued by shareholders for allegations of providing false information about the soundness of the bank’s business model, even with high interest rates.
The lawsuit targets the “First Republic” for the first time since the March crisis, due to the unprecedented cash withdrawals abroad.
The First Republic is reported to be cutting its workforce, trimming its balance sheet and working on strategic choices after deposits fell more than expected.