In pre-market trade to stock is down $0.93 (-11.48%) to $7.17but that doesn't begin to illuminate how upside-down things are on the balance sheet. All those cheap deposits that left have to be replaced with something and the normal options are at a percentage point to three points above what FRC is receiving from their assets.
From CNBC, April 26:
Bankers’ pitch to save First Republic: Help us now, or pay more later when it fails
- Advisors to First Republic will attempt to cajole the big U.S. banks who’ve already propped it up into doing one more favor, CNBC has learned.
- The pitch is something like this: Purchase bonds from First Republic at above-market rates for a loss of a few billion dollars. If not, these same banks will face roughly $30 billion in FDIC fees when First Republic fails.
- The advisors have already lined up potential purchasers of new First Republic stock if they can fix the bank’s balance sheet, according to sources.
....MUCH MORE
Here's the Wall Street Journal with a quick hit yesterday:First Republic Bank Faces Hard Math on Rates
First Republic Bank’s numbers aren’t those of a bank with a sustainable business, even if its funding situation has stabilized, as it said Monday when reporting earnings.
That is a big reason why the stock is once again tumbling. Simply put, First Republic is having to pay more and more to borrow money—the raw material of banking—and it has made huge loans at fixed interest rates that are too low for today’s higher rate environment.The bank’s earnings release showed just how its business model is broken. For instance, most of First Republic’s loans last quarter were for residential real estate. The average yield on those loans—that is, the rate that the bank earned—was 3.18% during the first quarter of 2023. That was slightly higher than it was a quarter earlier, as were the average balances for loans and other interest-earning assets.
The writer, Jonathan Weil, gets it.
And that is what I was trying to convey yesterday with my less than artful:
And the two sides of their balance sheet are such a mismatch that it looks impossible for them to be profitable in the current quarter.
