Economic Insider

First Republic sees massive fall in shares

Image Commercially Licensed From: DepositPhotos
Image Commercially Licensed From: DepositPhotos

The First Republic Bank’s stock has decreased by more than 40% as a result of investors’ uncertainty about what will happen to the company.

The declines took place the day after a medium-sized American bank revealed that during the banking panic last month, consumers had pulled more than $100 billion (£80 billion) out of their accounts.

First Republic was considered to be one of the banks most likely to fail after a succession of bank failures led people to fear a crisis in the industry.

It was made stable by a bailout deal worth billions of dollars.

The report from the company showed how quickly the worries spread.

The bank said that in the days after those crashes when people rushed to get their money out, they lost about 40% of their deposits.

It had about $104 billion in deposits at the end of March, including $30 billion from other banks as part of a plan to boost trust.

The First Republic said that things had settled down since then.

It also said that it was looking at “strategic options” to improve its situation, such as laying off 20% to 25% of its staff in the coming months to save money.

The 16th largest bank in the U.S., Silicon Valley Bank, went out of business at the beginning of last month. This was the biggest loss of a U.S. bank since 2008.

Then, two days later, New York’s Signature Bank went out of business.

In an effort to stop more people from pulling their money out of banks, the government stepped in to guarantee accounts above and beyond what is usually allowed.

But that didn’t stop worries from spreading right away. In Europe, Swiss officials also helped a big bank in trouble, Credit Suisse. In the first quarter of the year, 61.2 billion Swiss francs ($69 billion) left the bank.

Central banks all over the world, like the Federal Reserve in the U.S. and the Bank of England in the U.K., have sharply raised rates to try to stop inflation.

The moves had made the big portfolios of bonds that banks bought when interest rates were lower and worth less.

Customers who were worried about Silicon Valley Bank’s finances suddenly took money out of their accounts, which caused the bank to fail. But unfortunately, the event also made people worry about what was going on at other companies.

First Republic Bank sees multi-billion dollar rescue deal

A group of big U.S. banks put $30 billion (£24.8 billion) into First Republic, a smaller regional bank that was thought to be close to failing.

The move came as U.S. officials tried to calm people’s fears about the banking system’s health after several banks failed.

Concerns about the sector have spread worldwide, making people worry about a disaster.

The move was called “most welcome” by U.S. officials, and the banks said it showed their “confidence.”

They said that banks had a lot of cash and made a lot of money.

“Nothing that happened recently changed this,” they said. “What the biggest banks in the U.S. do shows how confident they are in the country’s banking system.”

Reports of the 11 banks’ plans to help, led by JP Morgan and Citigroup, helped the financial markets rise. At one point, shares of First Republic went up by more than 20%, which stopped trading.

But selling started again after the market closed, showing that worries still exist.

Investors worried that the San Francisco-based company could be the next bank with a rush of customers pulling out their money. As a result, the price of the company’s shares dropped by almost 70% in the last week.

Before the bailout, £55 billion was taken out of Credit Suisse.

Credit Suisse has said how big the bank run was that forced it to get help from the government in March.

The Swiss banking giant said that 61.2 billion Swiss francs (£55.2 billion or $68.6 billion) left the bank in the first three months of the year.

It happened at the same time that the lender released what is likely to be its final financial numbers.

Its forced sale to UBS, a Swiss bank that competes with it, should be done soon.

Credit Suisse said the number of assets it managed dropped to 502.5 billion Swiss francs at the end of March, almost 29% less than last year.

“As of April 24, 2023, these outflows have slowed but haven’t stopped.”

After the failures of Silicon Valley Bank and Signature Bank in the United States in March, clients of Credit Suisse started taking their money out of the bank.

Read Also: US banks move to save First Republic Bank

In Switzerland, the government devised a plan to help Credit Suisse. It included financial pledges worth more than 200 billion Swiss francs and got UBS to agree to take over Credit Suisse.

Credit Suisse had been losing money and had many problems in the past few years, like being charged with money laundering.

It lost 7.3 billion Swiss francs in 2022, the worst year since the 2008 financial crisis. It had warned that it didn’t think it would be profitable again until 2024.

Reference: First Republic: Shares fall after more than $100bn of withdrawals