(Reuters) – First Republic Bank shares were listed sharply lower on Tuesday in trading ahead of the opening of Wall Street on the scale of the difficulties facing the U.S. regional bank, rekindling concerns about the sector and drags European values into the red.
The bankruptcies of Signature and Silvergate in March did not leave First Republic unscathed, also victim of a “bank run”. In the first three months of the year, deposits fell to 104.47 billion dollars against 176.43 billion in the fourth quarter of 2022, the establishment announced on Monday evening.
The decline in deposits is such that it could prove very difficult to recover from, Wells Fargo analysts said.
In pre-market, First Republic fell 21% to 12.7 dollars per share.
“It is likely that this will fuel the concerns of banks at the opening of the (European) markets”, commented Ipek Ozkardeskaya, senior analyst at Swissquote Bank, in a note published early in the morning.
The Stoxx banks index lost 1.67% around 09:35 GMT. In Paris, Crédit Agricole, BNP Paribas and Société Générale drop from 1.20% to 2.51%.
This story “may rekindle fears of a long-forgotten banking crisis,” one trader said.
The fall in quarterly profits of UBS (-2.56%), which is taking over Credit Suisse, is also weighing on the sector.
First Republic, headquartered in San Francisco, said it is considering several strategic options, including a restructuring of its balance sheet. It also plans to increase its insured deposits, reduce its borrowing from the Federal Reserve and lay off 20% to 25% of its employees in the second quarter.
“We are taking steps to significantly reduce our expenses to align with our objective of reducing the size of the balance sheet,” chief executive Mike Roffler said during a conference call, which ended without the executives don’t respond to analysts’ questions.
Concerns about the strength of First Republic had prompted several major US banks to bail it out by depositing $30 billion in funds.
Without the injection of these 30 billion dollars, the drop in deposits would have been around 102 billion.
(Mehnaz Yasmin in Bengaluru and Nupur Anand in New York, with David French, Anna Pruchnicka, Lucy Raitano, , Laetitia Volga, editing by Kate Entringer)
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