First Republic (FRC) said Monday it lost a net total of $72 billion in deposits during the first quarter, an outflow that would have topped $100 billion if not for a rescue from 11 of the nation’s largest banks.
Customers pulled their money from the San Francisco institution following the March 10 failure of Silicon Valley Bank, an event that triggered panic across the banking system and caused depositors to seek the perceived safety of bigger financial institutions.
First Republic tried to weather the turmoil by borrowing from the Federal Reserve, receiving $30 billion in uninsured deposits from 11 of the country’s largest banks and hiring advisers to pursue a number of options, including a sale.
Despite these moves First Republic’s total deposit balance still fell by a net total of 41% during the quarter, to $104.4 billion, according to its first-quarter earnings report released Monday. Without the $30 billion infusion from the 11 rival banks its net outflow would have been $102 billion. The net outflow was considerably more than expected.
The disclosures sent First Republic’s stock spiraling in after-hours trading, down as much as 21%. Its stock has dropped more than 85% since January. On Monday it closed the trading day up 12%.
“The future of this company is very uncertain,” CI Roosevelt Associate Partner Jason Benowitz told Yahoo Finance. First Republic, he added, “lost so much in deposits, they have to replace that funding somehow, so they’re doing it with borrowing.” The borrowing will “really weigh on their profitability both in the reported quarter and going forward.”
The bank said Monday that outflows began to stabilize the week of March 27 and deposit activity “has remained stable” through April 21. Its balance as of Friday was $102.7 billion, a drop of 1.7% since the end of the quarter that the bank attributed to seasonal client tax payments.
First Republic also said Monday that it is taking steps to increase its amount of deposits insured by the Federal Deposit Insurance Corporation, trim its borrowings and decrease loan balances to correspond with a reduced reliance on uninsured depositors. It also plans to reduce its workforce by 20-25% in the second quarter.
“Despite the uncertainty of the past two months, and while average account sizes have decreased, we have retained over 97% of client relationships that banked with us at the start of the first quarter,” First Republic CEO Michael Roffler said on a conference call following the release of results. The company didn’t take questions from analysts.
