First Republic's Deposit Drop Heightens in Q1 Concerns Amidst Banking Crisis

This deposit flight was more severe than Wall Street's predictions, with analysts estimating the bank's deposit figures to be about $145 billion at the end of the first quarter, according to FactSet's StreetAccount consensus estimate.The bank's deposit estimates ranged from $100 billion to $206 billion, according to FactSet. First Republic said that deposit flows have since stabilized, but this sudden dip in deposits is still causing concern.

CEO Michael Roffler spoke to the earnings call and reiterated his appreciation for the group of America's largest banks that placed $30 billion in uninsured deposits with First Republic. Additionally, Roffler stated that First Republic has maintained over 97% of client relationships since the beginning of the quarter, despite the outflows.

However, he did not provide any further details on this point and took no questions on the call.

On the other hand, First Republic beat Wall Street estimates on both the top and bottom lines. The bank reported $1.23 in earnings per share on $1.21 billion of revenue, compared to analysts surveyed by Refinitiv's expectations of 85 cents of earnings per share on $1.15 billion of revenue.

One reason that First Republic was seen as a potentially weak bank by investors and customers was its high percentage of uninsured deposits, which was an issue in the collapse of Silicon Valley Bank. The bank reported that as of April 21, it had $45.1 billion of cash, cash equivalents, and additional borrowing capacity, excluding the $30 billion from large banks.

Shares of First Republic fell more than 80% for the year as of Monday's market close. Investors are wary of the bank's stability given the collapse of two other mid-sized banks, which has raised fears about widespread bank failures. While First Republic's earnings beat expectations, the sudden decline in deposits remains a cause for concern.

Source: CNBC