Shares in First Republic Bank tank after lender says customers withdrew $100B in deposits
CBC
Shares in regional U.S. bank First Republic Bank fell another 15 per cent on Wednesday, a day after plunging to an all-time low after the mid-sized lender revealed that customers withdrew $100 billion US worth of deposits in the first quarter.
Shares in the California-based bank were changing hands for less than $7 US each in premarket trading on Wednesday. That's down from $16 on Monday and $120 at the start of March, before the U.S. banking sector was gripped by contagion fears in the fallout of the collapse of Silicon Valley Bank.
The bank is the latest U.S. lender hit by a so-called run on the bank, where depositors move to withdraw their money en masse from a bank deemed to be in trouble. Such runs tend to exacerbate whatever problems the bank had in the first place, creating a vicious cycle of negativity.
The bank's earnings on Monday revealed that the lender made $269 million US in profit last quarter on revenues of more than $1.2 billion, both down slightly from last year. But investors were far more concerned with the bank's net loss of deposits during the quarter: $100 billion.
"With the closure of several banks in March, we experienced unprecedented deposit outflows," chief financial officer Neal Holland said.
The bank says it is pursuing "strategic options" to improve its capital position, a plan that could include asset sales to raise money, or the creation of a so-called bad bank — where any toxic or money-losing assets would be carved off and placed into a new entity, leaving the remaining bank healthy.
At least three brokerages have cut their price targets on First Republic's shares since it reported first-quarter earnings on Monday.
