Banks That Backed First Republic Set Aside $100 Million Reserves
BY PYMNTS | APRIL 12, 2023
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First Republic Bank
America’s biggest banks are reportedly setting aside cash in anticipation of first-quarter losses.
The banking giants that helped shore up struggling First Republic Bank with a $30 billion infusion last month have put aside roughly $100 million each in quarterly earnings to protect against losses, Reuters reported Wednesday (April 12), citing unnamed sources.
JPMorgan Chase, Citi, Wells Fargo and Bank of America each deposited $5 billion into First Republic in March in a show of confidence in the banking sector, with another seven banks making up the rest of the $30 billion.
“The actions of America’s largest banks reflect their confidence in the country’s banking system,” the banks said in a news release.
“Together, we are deploying our financial strength and liquidity into the larger system, where it is needed most. Smaller- and medium-sized banks support their local customers and businesses, create millions of jobs and help uplift communities.”
JPMorgan, Citi and Wells Fargo are all scheduled to report earnings on Friday (April 14), while Bank of America will release its earnings on April 18.
This news follows reports earlier this week that the banks were expected to reveal a large outflow of funds.
According to a Tuesday (April 11) Financial Times report, analysts forecast that depositors seeking high returns from money market funds and other alternatives pulled nearly $100 billion from those four big banks in the first quarter of this year.
If these projections turn out to be true, the FT notes, it would be in spite of the rush by consumers to shift their cash from regional banks into larger lenders in the aftermath of the back-to-back failures of Silicon Valley Bank (SVB) and Signature Bank last month.
“The number one, two or three things to watch this quarter are deposits, deposits, deposits,” Jason Goldberg, research analyst at Barclays, told the FT.
As PYMNTS noted last week, the country’s smaller and regional banks have suffered substantial fallout from the SVB collapse.
While the country’s 25 largest banks recorded $120 billion in deposits in the days after the California bank’s failure, all banks smaller than those larger financial institutions saw $108 billion in withdrawals. Meanwhile, money market funds gained more than $220 billion in this period.
“Although the worst of the panic seems to have subsided, there are real fears about whether deposits will continue to fall for these smaller players in the sector,” PYMNTS wrote.
