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First Republic stock tanks 30% on Q1 results: ‘it’s a zombie bank’

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First Republic Bank (NYSE: FRC) reported better-than-expected profit for its first financial quarter on Monday. Shares still plunged 30% in extended hours.

Why is First Republic stock down?

The bank stock is being punished for a massive hit to deposits that tanked 41% sequentially.

On the plus side, though, deposits have stabilised in April. Still, Bob Elliott – the Co-Founder and CEO of Unlimited said today on CNBC’s “Closing Bell: Overtime”:

At this point, FRC is a zombie bank with deposits down almost $100 billion from the private sector. By and large, its balance sheet is being supported by the Fed programmes that it’s borrowing from.

First Republic ended the quarter with per-share book value of $76.97 – up 10.4%.

First Republic is committed to cutting costs

Also on Monday, the financial services company said it’s considering strategic options to reinforce its capital stature.

To that end, it plans on reducing its balance sheet, minimising its exposure to short-term borrowing, cutting executives’ compensations, quitting nonessential projects, and paring back on corporate office space.

The commercial bank also said today in its press release that it will lower its headcount by up to 25% but that couldn’t buoy the First Republic stock either. Elliott added:

The forward-looking story for FRC is that there’s going to be an orderly unwind. There’s business value in certain things like wealth management. They’ll probably try to spin off or sell different pieces of the bank.

Notable figures in First Republic Q1 results

Earned $269 million versus the year-ago 401 million

Per-share earnings also declined from $2.0 to $1.23

Revenue slid 13.4% year-over-year to $1.20 billion

Consensus was 95 cents a share on $1.22 billion revenue

Net interest income printed at $923 million – down 19.4%

Versus its year-to-date high, First Republic stock is down more than 90% at writing. According to Bob Elliott, the U.S. is not facing an all-encompassing banking crisis.

Almost 50% of the borrowings from the Fed through the end of March came from First Republic. That’s bad for FRC but pretty good for the broader banking system.

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