Oh, the Calamity — Is FRB FUBAR?
First Republic Bank remains in hot water.
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Avert Your Eyes: FRB Reports Q1 Results
Once upon a banking crisis, two large U.S. regional banks, Silicon Valley Bank and Signature Bank, took a nosedive in early March, sending ripples of panic throughout the global banking community. The government’s ensuing rescue may very well have buttressed the financial system from a meltdown reminiscent of ‘08 — but many banks aren’t out of the woods yet.
Caught in the turmoil was First Republic, the 14th-largest U.S. commercial bank.
On Monday, FRB reported Q1 results, announcing a $100 billion drop in deposits (excluding $30 billion of rescue deposits from major banks) and a one-third reduction in net income.
The bank's troubles began when two-thirds of its deposits were found to be uninsured, triggering scrutiny in the wake of Silicon Valley Bank's collapse. A rescue plan involving 11 big banks placing $30 billion in deposits at First Republic failed to alleviate concerns. Instead, the bank suspended dividends, its shares slumped further, and rumors swirled about its future as a stand-alone institution.
Despite the setbacks, First Republic bravely claimed it would survive, but not without some belt-tightening — particularly "significant" executive pay reductions and a workforce cut of up to 25% by midyear.
Investors, however, remain as jittery as a caffeinated squirrel, with First Republic's shares trading just above their all-time low. The restructure also casts a scorching light on $12 million of share sales by FRB executives ahead of the collapse and multi-million-dollar payments to the bank founder’s family.
Three Insightful Reads
The Demise of Silicon Valley Bank —
The Invasion of Zombie Companies that Wasn’t — Goldman Sachs
A Share Bought is a Share Sold —
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