First Republic (FRC) Gets $30B Uninsured Deposits From US Banks
First Republic Bank FRC announced receiving uninsured deposits aggregating $30 billion on Mar 16, 2023, from 11 banks of the country — Bank of America Corporation BAC, Citigroup Inc. C, JPMorgan Chase & Co. JPM, Wells Fargo, Goldman Sachs, Morgan Stanley, Bank of New York Mellon, PNC Bank, State Street, Truist, and U.S. Bank.
Specifically, Bank of America, Citigroup, JPM and Wells Fargo are each making a $5-billion uninsured deposit into First Republic. Goldman Sachs and Morgan Stanley are each making an uninsured deposit of $2.5 billion, whereas BNY-Mellon, PNC Bank, State Street, Truist and U.S. Bank are making an uninsured deposit of $1 billion each.
This support from America’s largest banks indicates confidence in FRC and will help ensure the company has enough liquidity to meet customers' withdrawals, thereby avoiding tipping off a broader banking crisis.
Management noted, “Their collective support strengthens our liquidity position, reflects the ongoing quality of our business, and is a vote of confidence for First Republic and the entire U.S. banking system.”
On Mar 12, the company obtained additional liquidity access from the Federal Reserve Bank and JPMorgan Chase, fortifying its financial position with more than $70 billion in unused funds for operations and has since then drawn on this borrowing capacity.
From Mar 10 through Mar 15, 2023, FRC’s borrowings from the Federal Reserve varied from $20-$109 billion at an overnight rate of 4.75%.
Excluding $30 billion of uninsured deposits that it received from other banks, FRC’s cash position aggregated $34 billion as of Mar 15, 2023. Moreover, since the close of business on Mar 9, 2023, the company has also increased short-term borrowings from the Federal Home Loan Bank by $10 billion at a rate of 5.09%.
Encouragingly, insured deposits since the close of business on Mar 8, 2023, through Mar 15, 2023, have been stable. Moreover, daily deposit outflows have slowed considerably, indicating a reduced risk of deposit flight.
While financial aid from other banks improves FRC’s ability to navigate any liquidity crunch, the bank is focusing on reducing its borrowings, and reconsidering the composition and size of its balance sheet. Consistent with this focus, the bank has suspended its common stock dividend.
First Republic currently carries a Zacks Rank #4 (Sell).
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