First Republic Bank expects to cut its workforce by 20-25 per cent this quarter, the embattled lender confirmed this morning.
The layoff announcement comes as First Republic reported first-quarter earnings, just weeks after a consortium of banks stepped in with US$30 billion ($44 billion) to prevent the regional lender from failing.
The bank reported earnings per share of US$1.23 ($1.83), coming in higher than analysts' expectations of US$0.85 ($1.26) per share, according to Refinitiv data.
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San Francisco-based First Republic reported that year-over-year revenues were down 13.4 per cent. Net interest income, the money a bank makes from charging interest on the loans they give out minus the interest they have to pay to depositors and other lenders, was down 19.4 per cent.
Total deposits were US$104.5 billion ($156 billion), well short of analysts' expectations of US$136.7 billion ($204 billion).
The bank said it saw a sharp drop in deposit activity after the collapse of Silicon Valley Bank and Signature Bank last month, but that activity began to stabilise at the end of March and has since remained steady.
First Republic also said in its earnings release today that it was "taking actions to strengthen its business and restructure its balance sheet."
Those actions include efforts to increase insured deposits.
When the banking crisis erupted, about two-thirds of First Republic's deposits were uninsured with the Federal Deposit Insurance Corporation. That's lower than the 94 per cent at Silicon Valley Bank — but at the end of last year, First Republic had an exceptionally high ratio of 111 per cent for loans and long-term investments to deposits, according to S&P Global — meaning it has loaned and invested more money than it has in deposits.
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First Republic has seen its share price plummet nearly 90 per cent since March 1. The drop comes as investors scrutinise lenders with a high amount of uninsured depositors — a response to the recent banking turmoil.
Shares of First Republic dropped about 6.4 per cent in after-hours trading yesterday.
In addition to reducing its workforce by up to a quarter, the bank said it would take further steps to reduce its expenses. Those include significant reductions to executive compensation, condensing office space and reducing nonessential projects.
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