2023-04-25 21:17:52
U.S. bank First Republic slumped on the New York Stock Exchange on Tuesday as investors worried regarding the company’s future as its customers withdrew more than $100 billion in deposits in the first quarter. The action ended Tuesday down 49% on Wall Street following being suspended several times during the session, in the wake of the publication of its financial results Monday evening. It is down more than 90% compared to the beginning of the year.
The bank found itself in the spotlight in mid-March, when the authorities and other financial institutions came to its rescue to prevent it from experiencing the same fate as Silicon Valley Bank and Signature Bank, namely the bankruptcy.
Read also: Fear over US regional banks
First Republic assured that withdrawals from its customers had stabilized since the end of March, that it planned to cut its expenses by laying off up to a quarter of its workforce and that it was going to limit the sums it lends. But the management did not give many details, deciding not to answer questions from analysts as is usually the case on the occasion of the publication of quarterly results. Its managing director simply indicated that in addition to measures intended to strengthen its financial health, the bank was studying “strategic options”.
“We don’t see an easy solution”
According to Financial Timeswhich relies on sources familiar with the situation, White House, central bank and Treasury officials are talking to First Republic.
The bank would like the government to “bring together the relevant parties to find a solution,” a source close to the establishment told the economic daily. “We don’t see an easy way out for the bank and we still believe there is a significant likelihood there will be little left for shareholders once the situation clears up,” a note said. Eric Compton of Morningstar.
In the current situation, with the balance sheet as it is, “we do not believe that First Republic will be profitable in the future,” he says.
To read: Why banks are facing a major crisis of confidence
Bad day on Wall Street
The New York Stock Exchange also had its worst session in more than a month on Tuesday. The Dow Jones index fell 1.02% to 33,530.83 points, the tech-heavy Nasdaq lost 1.98% to 11y799.16 points and the S&P 500 dropped 1.58% to 4071.63 points. The VIX index, known as the “fear index”, which measures market volatility, jumped 15%. “It was a little scary on the bank side,” said Steve Sosnick, chief strategist at Interactive Brokers, observing the rout in the shares of other regional banks like PacWest (-8.92%) or Western Alliance (-5 .65%).
The big banking establishments also took the water, losing between 2% and 3%, from Bank of America to JPMorgan via Citigroup.
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