First Republic Loses $72 Billion in Deposits During 1Q Amid Banking Turmoil


First Republic, a San Francisco-based regional lender, suffered a major loss of $72 billion in deposits during the first quarter of this year, causing panic across the banking system. This was mainly due to the failure of Silicon Valley Bank on March 10, which triggered customers to withdraw their money and seek the perceived safety of bigger financial institutions. First Republic tried to weather the storm by borrowing $70 billion from the Federal Reserve, receiving $30 billion in uninsured deposits from 11 of the country's largest banks, and suspending common and preferred stock dividends, as well as eliminating executive bonuses. Despite these efforts, its total deposit balance fell by 41% during the quarter, to $104.4 billion.

This loss of deposits has caused concern among investors, leading to a 30% drop in First Republic's first-quarter earnings and a 33% drop from the year-earlier period. In addition, its net interest income, which measures the difference between what it makes on its loans and pays for its deposits, dropped by 21% from the fourth quarter and 19% from the first quarter of 2022. Moody's also downgraded First Republic's preferred stock rating, along with 10 other regional banks, citing "a deterioration in the operating environment and funding conditions for US banks."

This news is significant as many other regional banks also reported deposit outflows during the first quarter, indicating that the banking industry is facing a difficult period of adapting to higher interest rates and rising deposit costs. First Republic, like many other regional banks, is striving to adapt to these changes.

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