First Republic Bank shares have fallen to a record low, after the bank admitted that last month’s financial crisis caused a deposit flight of over $100bn.
Stocks of the bank, which was saved from a possible collapse , dropped by as much as 29% on February 2.
The company’s first-quarter earnings report revealed the challenges it faces in regaining the business.
First Republic reported that the withdrawals had slowed down since the announcement of the rescue money, but the company has yet to recover any significant deposits.
Financial analysts stated that the amount was higher than expected and had revived concerns that First Republic might become the third US Bank to fail following the collapse of Silicon Valley Bank & Signature Bank.
Credit Suisse in Switzerland, which suffered a outflow of PS55bn in deposits was also forced to merge into rival UBS.
The story was born out of concern that central banks’ balance sheets had been damaged by the rising interest rates they imposed to combat inflation.
First Republic, a San Francisco-based company, announced that it will shrink its balance sheet.
Bloomberg News reported the bank is exploring asset sales up to $100bn.
First Republic announced that thousands of jobs would be lost by the end June after executive pay cuts.
The bank reported that it would be laying off between 20-25% of the 7,200 employees at its end-of-year report.
The results statement of this US regional lender did not support the shares of its competitors. Some saw their shares drop by over 5%.
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Analysts say that First Republic in particular, and the entire sector, must assure their customers of their deposit security.
Investors can be assured that the company has sufficient liquidity to function effectively.
Susannah Streeter is the head of money markets at Hargreaves Lansdown. She said: “It appears that the lifeline given to First Republic by major lenders has not stopped the confidence from sinking.
Investors are fleeing from the stock as they sense panic. Worries about another bank collapse are also rising.
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