(News Bulletin 247) – At the end of March, the deposits of the San Francisco establishment fell by 40% in the space of three months, to 104.7 billion dollars. Its action collapses and the bank will restructure.

It is one of the US banks that remains under close market scrutiny. Following the bankruptcy of Silicon Valley Bank (SVB) in March, investors (and depositors) feared that other regional establishments would suffer from the same ills as the Californian bank. This resulted in significant transfers of deposits from the smallest establishments to the larger ones, which were deemed more solid.

Based in San Francisco, First Republic Bank was hit hard by these fears, to the point of requiring, in March, the intervention of eleven large banks which came to deposit 30 billion dollars in its accounts. A way of trying to reassure the market to avoid contagion.

The financial results of the establishment, published overnight from Monday to Tuesday, however, reignited the fears of investors, with an even stronger hemorrhage than anticipated by analysts.

Staff that will be compressed

In the first three months of 2023, First Republic Bank lost more than 70 billion dollars in deposits, (72 billion), or 40% of the total, deposits amounting to 104.5 billion dollars at the end of March against 176 .44 billion dollars at the end of December. Surveyed by Bloomberg, analysts expected a loss of “only” $ 41 billion in the quarter.

Note, moreover, that some 104.5 billion dollars in deposits at the end of March include the 30 billion granted by the major American banks which rushed to the rescue of First Republic Bank. In addition, its profit fell by 37% over one year to settle at 229 million dollars.

Unsurprisingly, the market did not appreciate. On Wall Street, in electronic trading following the close of the market, First Republic shares fell 22%.

These bad results are all the more oil stain that they succeed those of the big American banks which, on the whole, proved to be robust, in particular those of JPMorgan.

First Republic, however, reported that deposit flight had subsided markedly in April. The San Francisco bank’s total deposits stood at $102.7 billion as of April 21, a limited decline of 1.7% from the end of March.

In view of its difficulties, the Californian establishment has decided to take several drastic measures, in particular on its cost base. The bank plans to cut 20% to 25% of its workforce in the second quarter and intends to stop its projects and activities deemed non-essential. It also plans to reduce the size of its balance sheet, in particular by reducing loans.