San Francisco

First Republic rattles investors: California-based regional lender First Republic revealed on Monday evening that its deposits had fallen by roughly $100bn in the first quarter – 41% of the total it had at the end of last year, says Paul J Davies on Bloomberg. Executives then compounded the unease by refusing to take questions. The shares halved the next day. “Owners of the $20bn of uninsured deposits still at the bank are likely to be incredibly nervous, if not already moving.” Even Goldman Sachs, one of the 11 big banks that loaned

First Republic a collective $30bn, signalled “wariness” over its $2.5bn share of the burden, booking a loss provision.

Before Monday, First Republic’s stock was already down

80% since the US regional banking crisis began last month. When Silicon Valley Bank (SVB) collapsed, First

Republic was thought to be unfairly suffering from the contagion – its bond holdings were nothing like those SVB held, the unrealised losses on which sparked the crisis. It turns out First Republic also holds assets that are “functionally pretty similar” – interest-only home loans that aren’t due to get any principal repayments for ten years. “No one is going to buy its mortgages at face value, but selling much of the book at fair value could be ruinous.” It might be able to sweeten the sales with warrants (the right to buy stock at a specific price and date) so buyers profit from a hoped-for recovery.

Even so, “it’s very hard to see a good outcome in First Republic’s story”.