FRC - The Unexpected Upside of First Republic's Shrinking Deposits
2023-04-27 09:31:15 ET
There's no getting around it. First Republic Bank (NYSE: FRC) dished out disappointing first-quarter numbers. Chief among them is the $100 billion tumble in total customer deposits, driving shares 49% lower on Tuesday following Monday's post-close release of the bank's Q1 report. If the decision to lay off one-fourth of its workers is any indication, the bank doesn't know when -- or even if -- it will get this money back.
However, there's a small victory quietly buried in other parts of the bank's balance sheet. Namely, its asset base actually looks a little healthier now than it did headed into last quarter's suspected liquidity crisis sparked by rival Silicon Valley Bank (owned by SVB Financial ). This backing is made even healthier (relatively speaking) by the fact that First Republic now has considerably fewer deposits to cover.
On the off chance you're reading this and aren't aware, Silicon Valley Bank collapsed last month due to major liquidity problems . Basically, it was struggling to cover all of its customers' withdrawals. It sold the bulk of its so-called "available for sale" debt securities meant to cover heavy draws from customers' checking and savings accounts. But with rising interest rates driving bond prices lower for the better part of last year, the sale of these securities still wasn't enough to cover its customer withdrawals.
For further details see:
The Unexpected Upside of First Republic's Shrinking Deposits