Even as the banking sector woes in the US are going on, lender First Republic Bank is facing the free fall of its shares following its financial results on Monday. Its shares have declined nearly 66.29 per cent since Monday, April 24. This is the third bank to face a crisis after the collapse of two other US banks, Silicon Valley Bank and Signature Bank.
First Republic Bank’s shares on Monday stood at $16.14 apiece on Monday, April 4. However, after the announcement of its results in which it posted a significant decline in its deposits in recent months, its shares started declining. Now, its shares traded at $5.44 apiece on Wednesday, April 25, which is 66.29 per cent lower as compared with its Monday price.
Why Are First Republic Bank’s Shares Falling?
First Republic Bank’s shares have started falling sharply after the announcement of its Q1 results on Monday, in which it showed a decline of around $70 billion in its deposits since March 9. Its deposits on March 9, before Silicon Valley Bank collapsed, had stood at $173 billion, which declined to $102.7 billion as on April 21. In the first quarter, its deposits saw an outflow of over $100 billion. This raised doubts about the bank’s financial health.
The share sell-off was also aggravated after media reports said that the US government officials were currently unwilling to intervene in the First Republic rescue process.
What Is First Republic Bank Doing To Control Share Fall?
First Republic Bank is looking at several options, including selling off its unprofitable assets such as the low-interest mortgages it provided to wealthy clients. According to news agency AP, the bank is also planning to lay off up to a quarter of its workforce, which stood at 7,200 employees at the end of last year.
What Are the Roadblocks?
Citi analysts downgraded First Republic Bank on Wednesday. They said there is a large level of uncertainty in outcomes, and expect losses beyond the next year. Apart from this, several brokerage houses have also cut their price targets on the bank’s shares.
Various banks in the US and Europe have been facing a crisis, with two banks including Silicon Valley Bank and Signature Bank in the US having failed.
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