First Republic Bank’s stock tanks by 49% following the disclosure of a massive deposit outflow in March

First Republic Bank (FRC) faced a significant decline on Tuesday as their stock plummeted 49% due to an outflow of over $100 billion in deposits in March. Analysts are expressing concern about the bank’s future and the possibility of a potential failure. In response, FRC revealed its survival strategy, which includes increasing insured deposits, reducing borrowings, slimming its balance sheet, and cutting down on workforce to decrease expenses. The bank is also pursuing a sale or raising more capital as strategic options.

Bloomberg reported that FRC is considering divesting $50 billion to $100 billion in long-dated securities and mortgages to simplify future capital raising. Other options reportedly being considered include creating a “bad bank,” similar to the technique used during the S&L crisis in the 1980s and 1990s for troubled bank assets. Other bank stocks, including FRC’s regional rivals, also dropped along with FRC’s stock. Analysts predict a lot of uncertainty for FRC, with its existence hanging uncertain. Despite that, some analysts believe that FRC may continue moving forward as a standalone company.

First Republic, a US bank based in San Francisco, is the focus of attention among investors following the seizure of Silicon Valley Bank by regulators in March. As of March 9, First Republic had $173.5bn in deposits, which then saw unprecedented outflows totalling more than $72bn by the end of March. However, deposits began to stabilise the week of March 27 and deposit activity has remained stable through April 21. Despite the outflow, First Republic says it has retained 97% of client relationships that banked with the group at the start of Q1.