First Republic Bank: Is it Done?

 What Is Going On With First Republic Bank?

  

     First Republic Bank reported earnings after the closing bell this afternoon. The top line and bottom line actually had some phenomenal beats. However, it was some other mentions in the release that caused the stock to plummet in the after hours. These statements have left a lot of investors questioning of what the future actually looks like for this bank. I just want to take a moment to address my last post, if you have not read that yet, I would highly recommend reading that before you dive into this one (link at the bottom of this post). I go deep into what exactly is happening in the banking world. This will guide you into things that I am going to talk about in this post.

    First Republic Bank is located in San Francisco, California and started in 1985. They mainly focus on metropolitan customers in the United States. Neal Holland is the company's CFO and had a couple of words to say. He said due to the closure of some banks in March, that they are working on restructuring to secure some more liquidity. They have a plan in place to work on the Balance Sheet and cut expenses and short-term loans. The thing that stunned a lot of investors the most was the deposits. From a year ago, it was down 35% from last year. More significantly it was down 41% from last quarter. This was part of the movement in response to the downfall of SVB. Depositors fled to get their money out of the smaller banks and get money into safer bigger banks. This hurts First Republic Bank bad.

    As mentioned in the last paragraph, the bank is looking to cut expenses. Within the earnings release, it is stated that they are taking some extreme measures when it comes to that. To start off, the company has stated that they will decrease executive compensation to give a little bit back to the business. They are also looking at cutting down on office space to to reduce the rent expenses. They have also suspended the payment of their dividends. This stings for the investors that are in this stock for income purposes. Lastly, and the most important in my opinion, is they are going to decrease their workforce by 20-25% within the next quarter. This is one of the most significant cuts that I have seen so far. It will help, don't get me wrong, but it will be interesting to see how well the business will be able to operate with a quarter of their workforce gone.

    Going forward, this is not a company you want to put your money into. With so much volatility and uncertainty, the risk is outrageous. First Republic is going to need a lot more to go right for them if they want to turn this thing around. I am going to keep a close eye on company performance and how it stands with a quarter of their workforce gone. I want to see if they successfully stick to their plan of fixing up their balance sheet and cutting expenses. This one is going to be a fun and interesting stock over the near-term.


Thank you for reading!

    


Link to last post:

https://stocktalkck.blogspot.com/2023/04/im-back-where-did-i-go-special-report.html

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