The
financial report of First Republic Bank (NYSE: FCR), one of the American financial
institutions that sparked a global wave of concern about the financial system’s
stability in March, has found itself in trouble again. According
to the financial report for the first quarter of 2023 published this week,
First Republic customers withdrew over $100 billion in deposits from their
accounts, fearing the institution’s bankruptcy. As a result, the already
heavily discounted FCR shares fell by another 50% in a single day on Wall
Street.First Republic Bank’s
Revenues, Net Profit, and Deposits DownThe report
published by First Republic shows that revenues in the first three months of
2023 fell 13.4% to $1.2 billion, while net profit was $269 million,
shrinking 32.9%. On the other hand, the value of deposits contracted 35.5% to $104.5 billion.Diluted
earnings per share amounted to $1.23, dropping 38.5%, while book value per
share grew 10.4% to $76.97.”With
the closure of several banks in March, we experienced unprecedented deposit
outflows,” said Neal Holland, the Chief Financial Officer of First
Republic. “We moved swiftly and leveraged our high-quality loan and
securities portfolios to secure additional liquidity. We are working to
restructure our balance sheet and reduce our expenses and short-term
borrowings.”In response
to the financial report, FRC shares fell 49% on Tuesday, closing the day at
$8.10, deepening the historical lows.The company
is now considering disposing of assets worth between $50 and even $100 billion
to improve its poor condition.First Republic Bank
Announces Restructuring PlanAs part of
the asset sale, First Republic is considering offloading long-term mortgage loans
and securities to reduce the gap between liabilities and assets. This was one
of the main factors that led the institution to the verge of bankruptcy in
March after a run on deposits.Potential
buyers include other large banks that could count on preferred shares or
warrants as an incentive to purchase the troubled unit’s assets, Bloomberg
reported.”With
the stabilization of our deposit base and the strength of our credit quality
and capital position, we continue to take steps to strengthen our
business,” said Mike Roffler, the CEO and President of First Republic.
“We remain fully committed to serving our communities, and we are grateful
for the ongoing support of our clients and colleagues.”Additionally,
the institution aims to cut costs, including laying off 20-25% of its employees
in the coming months. Even more
drastic cuts were announced earlier by others of the major investment
banks.Problems
following the publication of the quarterly report affected Credit Suisse, which lost CHF 1.3 billion in Q1 2023, and UBS, which took over the troubled
bank. Its revenues shrank 52% in the past quarter.
This article was written by Damian Chmiel at www.financemagnates.com.
