First Republic Bank’s stock, $FRC, plummeted by 40% on Tuesday. This marks a significant drop in the regional lender’s share prices. This drop is the latest in a series of blows to the banking system in the US. As many of you know, Silicon Valley Bank and a few other banks in the US and the EU collapsed last month. The recent earnings report showed that First Republic Bank lost $102 billion in deposits in the first quarter of 2023. This indicated a loss of more than half of the $176 billion held by the bank at the end of last year.
The bank’s profit fell 33% to $269 million over the three months ending in March. This data is compared to the same period in the previous year. The earnings report also revealed that revenue dropped 13% to $1.2 billion over the first three months of the year. This led to the bank’s stock falling nearly 90% since the beginning of the year.
According to CEO Michal Roffler, this is happening because of several factors. Among other things, Roffler acknowledged the “unprecedented deposit outflows” the bank experienced in March. Additionally, he is also concerned about the “challenges and uncertainties” it currently faces. However, Roffler also stated that the bank remained committed to delivering exceptional client service, whatever the case may be.
The Silicon Valley Bank Ripple Effect Keeps On Going
The bank’s struggles have not gone unnoticed by larger financial institutions. Bank of America, Citi, JPMorgan Chase, Wells Fargo, and Goldman Sachs injected $30 billion into First Republic Bank to stem losses and show confidence in the lender. However, this did not prevent the bank’s recent decline in share prices. If the decline continues, First Republic Bank could default, marking another bank collapse this year.
The failure of Silicon Valley Bank last month led to a ripple effect in the financial system. According to Federal Reserve data, small banks lost $108 billion in deposits in the week following the failure.
The banking crisis has had a significant impact on the global financial system. While the drop in First Republic Bank’s stock is indicative of the challenges faced by lenders in the US, international financial institutions are struggling as well. Just a month ago, Credit Suisse, one of the biggest banks in the European Union, collapsed. Today, First Republic Bank is experiencing the same “symptoms” as Credit Suisse did. The future of the bank remains uncertain, and it remains to be seen how it will recover from the recent losses.