First Republic Bank Reported Massive Deposit Outflows due to the Fallout of the SVB Collapse

First Republic Outflows

The failure of Silicon Valley Bank (SVB) in mid-March that forced regulators to close it, sparked a turmoil which put pressure on regional US institutions [1]. First Republic Bank was thrusted into the spotlight, with the stock wiping out nearly 90% of its value last month. A group of banking heavyweights, stepped in to assist the troubled institution, with the injection of $30 billion in uninsured deposits, in order to help prevent a run such as the one suffered by SVB. [2]

Monday's earnings report revealed that First Republic experienced "unprecedented" deposit outflows according to CFO Neal Holland, which declined by $72 billion in the first quarter or around 40% compared to Q4 2022, taking into account the aforementioned injection. [3]

One of the reason for the negative sentiment towards First Republic, was the large amount of uninsured deposits, which accounted for nearly 70% as of the end of December. As of the end of the first quarter, this dropped to 52%. The company also noted that deposits began to stabilize in the last week of March and have been stable since.

Earlier in the month, big banks had reported mostly solid quarterly results, showing that the financial stress did not affect them that much, with JP Morgan Chase for example posting record revenues of $39.34 billion and a 52% jump in its Net Income [4]. Yesterday's results by First Republic though, keep fears around the health of the financial system alive, with its stock shedding around 22% in extended trading.

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European banking giant Credit Suisse had set the stage earlier on the same day, announcing "significant" net asset outflows of CHF 61.2 billion in Q1 (around 69 billion USD) [5]. The US banking turmoil had spilled over to Europe as well, with Credit Suisse coming under attack. With the blessing of Swiss authorities, UBS came to the rescue and agreed to buy its troubled domestic rival or CHF 3 billion (around 3.4 billion USD). [6]

At today's earnings release, UBS said that the acquisition is expected to "strengthen" its position "as a leading and truly global wealth manager", while acknowledging the "magnitude" and "complexity" of the integration and restructuring. [7]

Nikos Tzabouras

Senior Financial Editorial Writer

Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.

With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.

References

1

Retrieved 25 Apr 2023 https://www.fdic.gov/news/press-releases/2023/pr23016.html

2

Retrieved 25 Apr 2023 https://www.businesswire.com/news/home/20230316005695/en/

3

Retrieved 25 Apr 2023 https://ir.firstrepublic.com/static-files/013f57fb-b980-4353-bbb3-0e7a3b27f20a

4

Retrieved 25 Apr 2023 https://www.jpmorganchase.com/content/dam/jpmc/jpmorgan-chase-and-co/investor-relations/documents/quarterly-earnings/2023/1st-quarter/be0fc3a0-c499-4af9-933c-6e7f75025097.pdf

5

Retrieved 25 Apr 2023 https://www.credit-suisse.com/media/assets/corporate/docs/about-us/media/media-release/2023/04/q1-23-press-release-en.pdf

6

Retrieved 25 Apr 2023 https://www.snb.ch/en/mmr/reference/pre_20230319/source/pre_20230319.en.pdf

7

Retrieved 15 Jul 2024 https://www.ubs.com/global/en/investor-relations/financial-information/quarterly-reporting.html

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