MADRID, 26 Abr. (EUROPA PRESS) –
The shares of First Republic Bank fell more than 36% in the session on Wednesday, after the regional bank’s share price sank 49.37% yesterday due to uncertainty about the future viability of the bank, which in the first quarter of 2023 suffered a massive flight of deposits.
In this way, since last Friday the price of the regional bank, one of the most affected during the financial turmoil that shook the market last March, accumulates a collapse of more than 70%.
According to the data published last Monday by the entity at the close of the markets in the United States, in the first quarter of the year it registered the withdrawal of almost 58% of the deposits recorded in the previous quarter, a figure of around 100,000 million Dollars.
“Deposit activity began to stabilize from the week of March 27, 2023 and has remained stable until Friday, April 21, 2023,” said the entity, which on April 21 had deposits for an amount of 102,700 million dollars (92,893 million euros), only 1.7% less than on March 31, 2023.
Likewise, in the presentation of its accounts, the entity announced that, as a result of recent events, “it is taking actions to strengthen its business and restructure its balance sheet.”
On the other hand, the entity also said it is taking measures to reduce its expenses, including significant reductions in executive compensation, the condensation of corporate office space, in addition to announcing that it will reduce its workforce of around 7,200 workers by approximately 20 -25% in the second quarter.
In this sense, sources consulted by Bloomberg indicated that the bank would be exploring divestments of assets valued between 50,000 and 100,000 million dollars (45,397 and 90,795 million euros) to strengthen its balance sheet, including the sale of mortgages and long-term securities with in order to reduce the mismatch between the bank’s assets and liabilities.
In this sense, one of the sources consulted indicated that potential buyers, including large US banks, could receive guarantees or preferred shares as an incentive to acquire assets of the entity above market value.
In this way, the CNBC chain points out that, despite the fact that the purchases would result in losses for the banks, First Republic advisers would be trying to convince them that letting this entity go bankrupt would be even more expensive if it still generated regulatory costs and fees. Taller.
Thus, if First Republic is successful in selling some of its assets, it will seek to raise capital, according to the sources, which would dilute current shareholders.
On the other hand, the sources indicated to CNBC that government officials currently would not be willing to intervene in the First Republic rescue process.
