First Republic Bank | FRC
Updated
First Republic stock plummets after revealing deposit exodus in March
The stock of First Republic FRC dropped more than 43% Tuesday after the bank surprised investors and analysts by revealing an outflow of more than $100 billion in deposits in March.
The disclosure made during the release of its first-quarter results on Monday afternoon raised new questions about the fate of a San Francisco lender that was at the center of last month's banking turmoil.the company outlined its survival strategy Monday. It said it plans to increase its insured deposits, trim the borrowings it used to cover customer withdrawals, shrink its balance sheet and reduce its workforce by 20-25% to cut expenses. It is also pursuing other “strategic” options, including a sale or raising more capital.the bank is considering divesting 550 billion to $100 billion of long-dated securities and mortgages to make an eventual capital raise easier.
Its stock, which was already down more than 85% this year, was briefly halted for volatility on Tuesday. Other bank stocks also dropped, including some of First Republic's regional rivals. PacWest (PACW), a lender based in Beverly Hills that reports earnings after the market close, was down more than 6%. HomeStreet (HMST), a lender in Seattle that reported earnings Monday, sank more than 36%. analysts said First Republic faces a lot of uncertainty as it tries to recover from last month's chaos. “First Republic appears to be in a holding pattern and burning fuel,” Evercore analysts said in a new research note. Wells Fargo analysts said in a separate note that First Republic's existence "very much hangs in the balance." "The future of this company is very uncertain," added CI Roosevelt Associate Partner Jason Benowitz in an interview with Yahoo Finance. First Republic, he added, "lost so much in deposits, they have to replace that funding somehow, so they’re doing it with borrowing.” The borrowing will “really weigh on their profitability both in the reported quarter and going forward.” Wedbush lowered its earnings estimates for that very reason, noting that the heavy deposit losses would weigh on profits. “Where does First Republic go from here?” Wedbush said in its note. “Our base case is that First Republic continues to move forward as a standalone company,” referencing an earlier note in April that argued First Republic faces a "Hobson's choice."
Even a sale of First Republic at $0 a share is unlikely, Wedbush said in that earlier note, because any buyer would still essentially have to pay billions to absorb the unrealized losses on its balance sheet.
Carlyle Group co-founder David Rubenstein told Yahoo Finance earlier this month that the federal government will need to provide some help for First Republic to find a buyer due to this “hole” on the lender’s balance sheet. “I think First Republic Bank is clearly on a watchlist, and probably somebody at some point will buy it. But the challenge there is that it needs government assistance,” Rubenstein said earlier this month
A lot of money is riding on its fate. Everyday investors have bet 2245 million on First Republic stock since the fall of Silicon Valley Bank, according to Vanda Research, the third highest inflow to a specific bank stock behind Bank of America (BAC) and Charles Schwab (SCHW). It also has one of the highest levels of interest among so-called short sellers betting on the stock to decline, according to analytics firm S3 Partners, accounting for 4480 million in such bets over the last 30 days. Its stock is now down more than 85% since the beginning of the year. First Republic "will be a bellwether of sentiment for the sector," Vanda said in a note last week.
The new hand wringing about First Republic following the release of its first-quarter results Monday. Its first-quarter earnings of 2269 million were down by 30% from the fourth quarter and 33% from the year earlier period. What surprised most observers is how many deposits it lost in March. As of March 9, the day before regulators seized Silicon Valley Bank, its deposits were $173.5 billion, down just slightly from the year end. On March 10, it began experiencing "unprecedented deposit outflows."
The net total outflow by the end of March was 772 billion, but the actual number was above $100 million after stripping out a temporary infusion of 330 billion in uninsured deposits from 11 of the country’s largest banks. Those deposits have to stay at First Republic for 120 days, according to a person familiar with the rescue plan. The bank said Monday that outflows began to stabilize the week of March 27 and deposit activity "has remained stable" through April 21. Its balance as of Friday was $102.7 billion, a drop of 1.7% since the end of the quarter that the bank attributed to seasonal client tax payments. "Despite the uncertainty of the past two months, and while average account sizes have decreased, we have retained over 97% of client relationships that banked with us at the start of the first quarter," First Republic CEO Michael Roffler said on a conference call following the release of results. The company didn't take questions from analysts.
The stock of First Republic FRC dropped more than 43% Tuesday after the bank surprised investors and analysts by revealing an outflow of more than $100 billion in deposits in March.
The disclosure made during the release of its first-quarter results on Monday afternoon raised new questions about the fate of a San Francisco lender that was at the center of last month's banking turmoil.the company outlined its survival strategy Monday. It said it plans to increase its insured deposits, trim the borrowings it used to cover customer withdrawals, shrink its balance sheet and reduce its workforce by 20-25% to cut expenses. It is also pursuing other “strategic” options, including a sale or raising more capital.the bank is considering divesting 550 billion to $100 billion of long-dated securities and mortgages to make an eventual capital raise easier.
Its stock, which was already down more than 85% this year, was briefly halted for volatility on Tuesday. Other bank stocks also dropped, including some of First Republic's regional rivals. PacWest (PACW), a lender based in Beverly Hills that reports earnings after the market close, was down more than 6%. HomeStreet (HMST), a lender in Seattle that reported earnings Monday, sank more than 36%. analysts said First Republic faces a lot of uncertainty as it tries to recover from last month's chaos. “First Republic appears to be in a holding pattern and burning fuel,” Evercore analysts said in a new research note. Wells Fargo analysts said in a separate note that First Republic's existence "very much hangs in the balance." "The future of this company is very uncertain," added CI Roosevelt Associate Partner Jason Benowitz in an interview with Yahoo Finance. First Republic, he added, "lost so much in deposits, they have to replace that funding somehow, so they’re doing it with borrowing.” The borrowing will “really weigh on their profitability both in the reported quarter and going forward.” Wedbush lowered its earnings estimates for that very reason, noting that the heavy deposit losses would weigh on profits. “Where does First Republic go from here?” Wedbush said in its note. “Our base case is that First Republic continues to move forward as a standalone company,” referencing an earlier note in April that argued First Republic faces a "Hobson's choice."
Even a sale of First Republic at $0 a share is unlikely, Wedbush said in that earlier note, because any buyer would still essentially have to pay billions to absorb the unrealized losses on its balance sheet.
Carlyle Group co-founder David Rubenstein told Yahoo Finance earlier this month that the federal government will need to provide some help for First Republic to find a buyer due to this “hole” on the lender’s balance sheet. “I think First Republic Bank is clearly on a watchlist, and probably somebody at some point will buy it. But the challenge there is that it needs government assistance,” Rubenstein said earlier this month
A lot of money is riding on its fate. Everyday investors have bet 2245 million on First Republic stock since the fall of Silicon Valley Bank, according to Vanda Research, the third highest inflow to a specific bank stock behind Bank of America (BAC) and Charles Schwab (SCHW). It also has one of the highest levels of interest among so-called short sellers betting on the stock to decline, according to analytics firm S3 Partners, accounting for 4480 million in such bets over the last 30 days. Its stock is now down more than 85% since the beginning of the year. First Republic "will be a bellwether of sentiment for the sector," Vanda said in a note last week.
The new hand wringing about First Republic following the release of its first-quarter results Monday. Its first-quarter earnings of 2269 million were down by 30% from the fourth quarter and 33% from the year earlier period. What surprised most observers is how many deposits it lost in March. As of March 9, the day before regulators seized Silicon Valley Bank, its deposits were $173.5 billion, down just slightly from the year end. On March 10, it began experiencing "unprecedented deposit outflows."
The net total outflow by the end of March was 772 billion, but the actual number was above $100 million after stripping out a temporary infusion of 330 billion in uninsured deposits from 11 of the country’s largest banks. Those deposits have to stay at First Republic for 120 days, according to a person familiar with the rescue plan. The bank said Monday that outflows began to stabilize the week of March 27 and deposit activity "has remained stable" through April 21. Its balance as of Friday was $102.7 billion, a drop of 1.7% since the end of the quarter that the bank attributed to seasonal client tax payments. "Despite the uncertainty of the past two months, and while average account sizes have decreased, we have retained over 97% of client relationships that banked with us at the start of the first quarter," First Republic CEO Michael Roffler said on a conference call following the release of results. The company didn't take questions from analysts.
Note
Bitcoin price jumps in the wake of First Republic Bank price crashNote
The White House is continuing to monitor the situation at First Republic Bank, which has continued to lose deposits this week, spokesperson Karine Jean-Pierre said on Thursday, vowing that the Biden administration stood ready to take action if needed.Deposits at regional banks have stabilized and the Biden administration can use the same tools it used in recent weeks to address financial stress if needed, she said.
Jean-Pierre said financial regulators and Treasury Secretary Janet Yellen agreed that the U.S. banking system remained sound after "decisive and forceful" actions were taken last month to protect depositors at two regional banks, Silicon Valley Bank and Signature Bank, and provide liquidity to the market.
"We have used important tools to quickly stabilize the banking system. We could use those tools again, if needed. Certainly we are monitoring this situation," she told reporters when asked about growing market worries about First Republic.
First Republic's shares were trading higher on Thursday after a bruising sell-off that wiped out 60% of the stock's value this week following the San Francisco-based bank's disclosure on Monday that it had lost more than $100 billion of deposits in the first quarter of the year.
Pressed to explain the administration's views on whether to protect depositors in First Republic, as it did in the cases of SVB and Signature, Jean-Pierre said, "We have proven how we have moved really quickly in ... taking decisive and forceful actions in the past, and I can assure you that you'll see that again from this administration."
Note
First Republic Bank FRC falls another 37% amidst rumors of a government takeoveryou have no idea how SHORT I am
you smell that? I smell money
Note
First Republic Bank will be acquired by JPMorgan after rescue efforts failNote
PacWest Bancorp, Western Alliance stocks post steep losses in wake of First Republic dealNote
what an easy short
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