First Republic stock plunges after depositors flee
First Republic Bank's stock plunged on Tuesday after it said depositors withdrew more than $100 billion during last month's crisis, with fears swirling that it could be the third bank to fail after the collapse of Silicon Valley Bank and Signature Bank.
The San Francisco bank said late Monday that it was only able to staunch the bleeding after a group of large banks stepped in to save it by injecting $30 billion in uninsured deposits.
Shares of First Republic plummeted more than 49% on Tuesday to close $8.10 share.
First Republic had roughly $290 billion in assets as of March 31, making it larger than SVB at the time of its failure. The troubled bank said it now plans to sell off assets and restructure its balance sheet, and lay off as much as a quarter of its workforce, which totaled about 7,200 employees at the end of 2022.
"With still a large level of uncertainty in outcomes and expected losses beyond the next year, we recommend investors sell shares as the outlook appears largely unclear," Citi analyst Arren Cyganovich said in a note to clients.
Other regional banks were under pressure in a down day for markets. The S&P 500 lost 1.2% early Tuesday afternoon. The Dow fell 0.8% and the tech-heavy Nasdaq fell 1.5%.
Before the failure of Silicon Valley Bank, First Republic had a banking franchise that was the envy of most of the industry. Its clients, mostly the rich and powerful, rarely defaulted on their loans. The bank made much of its money making low-cost loans to the rich, which reportedly included Meta Platforms CEO Mark Zuckerberg.
But its franchise became a liability when bank customers and analysts noted that the vast majority of First Republic's deposits, like those in Silicon Valley and Signature Bank, were uninsured — that is, above the $250,000 limit set by the FDIC. If First Republic were to fail, its depositors would be at risk of not getting all their money back.
First Republic reported first-quarter results Monday that showed it had $173.5 billion in deposits before Silicon Valley Bank failed on March 9. On April 21, it had deposits of $102.7 billion, which included the $30 billion the big banks deposited. It said since late March, its deposits have been relatively stable.