First Republic Struggles as Deposits Fell 40% Even with Banker Deposit Bailout
Posted on 04/24/2023
San Francisco-based First Republic Bank reported that its customer deposits plummeted 40.8% to US$ 104.5 billion in the first quarter of 2023. This is after the collapse of two other mid-sized banks (Silicon Valley Bank and Signature Bank) and sparked fear from customers about widespread bank failures. First Republic lost a net total of US$ 72 billion in deposits during the first quarter of 2023.
“Deposit activity began to stabilize beginning the week of March 27, 2023, and has remained stable through Friday, April 21, 2023. Total deposits were $102.7 billion as of April 21, 2023, down only 1.7% from March 31, 2023, primarily reflecting seasonal client tax payments that occur each April,” the bank press release read.
The deposit flight at First Republic was worse than Wall Street expected. Wall Street analyst estimated the deposit quarter-end figure to be circa US$ 145 billion. This data is according to the consensus estimate from FactSet’s StreetAccount.
The deposit figure for the end of March 2023 included $30 billion in time deposits from 11 larger U.S. banks that was announced on March 16, 2023 in an attempt to stabilize the broader banking system. If those deposits were excluded, First Republic’s deposits would have fallen by more than 50%.
As part of its earnings release, First Republic announced that it was cutting expenses through reductions in executive compensation, condensing office space and cutting headcount by 20% to 25% in the second quarter.
First Republic’s CEO disclosed publicly the bank is pursuing “strategic options”. In these instances, this usually means an equity raise or outright sale of the bank.