May Day for First Republic

By Ted Dieck | Recruiter’s View - Bank Failures | May 21, 2023

Another bank bites the dust.  First Republic Bank taps out on May 1 after clients pull $100 billion.  Fearful of losses in the event of a bank run, they cause a run on the bank.

I first wrote about First Republic Bank (FRC) in my March 20 Meltdown Update.

Four days before that, a group of 11 financial institutions had combined to deposit $30 billion into First Republic as a sign of support.  By March 20, Standard & Poor’s was already warning of even bigger problems ahead.

The California Department of Financial Protection and Innovation took possession of the bank on May 1.  It appointed the Federal Deposit Insurance Corporation as receiver of the bank. Then the FDIC accepted JPMorgan’s bid for the bank’s assets.

Chase generated a May 1 Press Release, explaining the situation.   

Remarkably, as this spontaneous acquisition took place, including $173 billion of loans, $30 billion of securities, and $92 billion of deposits (including that $30 billion of large bank deposits) Chase was able to announce…

“First Republic branches will open on Monday, May 1, as normal, and clients will continue to receive uninterrupted service, including digital and mobile banking capabilities.”

Pretty amazing, when you think about it.

Who’s Next?

Even as banks collapse, the Fed continues to raise interest rates.

That higher cost of money threatens a new set of weakened institutions.

And here they are…

Fitch Ratings downgraded PacWest Bancorp (PACW) to junk on April 14.
Also on April 14, Fitch downgraded Western Alliance Bancorp (WAL).
And May 08, Fitch downgraded the debt of Trustmark Corp (TRMK).
Both of those banks are still investment grade.

Recruiter’s View

Business and Employment opportunities are not improved by bank failures.
(The exception, of course, would be Chase CEO Jamie Dimon.  For the rest of us, collapsing banks are just messy.)

Treasury Secretary Yellen may already be warning that more bank mergers could be necessary.