First Republic Bank Q123 numbers highlight its troubled state.
Specifically, most key metrics are moving in the wrong direction. Revenues of $1.2bn are down by 13.4%. Net interest income is down by 19.4%. Net income of $269m is down by 32.9% y-o-y. Even the First Republic Bank net interest margin is moving in the wrong direction, down from 2.45% in the prior quarter to 1.77%.
Meantime, the First Republic Bank cost-income ratio rises from 63.9% in the prior quarter to 70.4%.
But it is the bank’s collapse in total deposits that jumps out. Deposits of $104.5bn are down by 35.5%. At the same time, loans rise by 22.6% to $173.3bn.
First Republic deposits stabilise
However, according to the bank, deposits have now stabilised. Deposit activity began to stabilise beginning the week of 27 March 27, 2023. The bank said that this has remained stable as at 21 April 21. Total deposits were $102.7bn as of 21 April 21, down 1.7% from March 31, 2023. The bank says that thus primarily reflects seasonal client tax payments that occur each April.
Jim Herbert, founder and executive chair, and Mike Roffler, CEO and President of First Republic said: “With the stabilisation of our deposit base and the strength of our credit quality and capital position, we continue to take steps to strengthen our business. We remain fully committed to serving our communities, and we are grateful for the ongoing support of our clients and colleagues.”
Neal Holland, Chief Financial Officer of First Republic added: “With the closure of several banks in March, we experienced unprecedented deposit outflows. We moved swiftly and leveraged our high-quality loan and securities portfolios to secure additional liquidity. We are working to restructure our balance sheet and reduce our expenses and short-term borrowings.”
First Republic: plans to axe 20-25% of workforce in Q2
First Republic Bank is taking actions to strengthen its business and restructure its balance sheet. These actions include efforts to increase insured deposits, reduce borrowings from the Federal Reserve Bank, and decrease loan balances to correspond with the reduced reliance on uninsured deposits. Through these actions, the bank intends to reduce the size of its balance sheet, reduce its reliance on short-term borrowings, and address the challenges it continues to face. The bank is also taking steps to reduce expenses, including significant reductions to executive officer compensation, condensing corporate office space, and reducing non-essential projects and activities. The Bank also expects to reduce its workforce by approximately 20-25% in the second quarter.