First Republic Bank, one of the largest banks in the United States, has been hit hard by the recent collapse of Silicon Valley Bank, with as much as $100 billion withdrawn from the bank in just two weeks.
While the bank was able to reduce its short-term borrowing through a time deposit from some of the largest US banks, it remains in a precarious situation, having borrowed as much as $138 billion in March and still owing $104 billion to the Federal Reserve, the Federal Home Loan Bank, and JP Morgan.
The situation has been compounded by the fact that the bank’s balance sheet does not make it clear where the $50 billion of the $104 billion borrowed has gone.
What is clear is that all the so-called deposits are now borrowed money from the Fed and JP Morgan and that the bank’s deposits are now lower than its loans.
Revenues for Q1 2023 were down 13% to $1.2 billion, and net interest income was down by 20% to just under $1 billion.
To address the situation, the bank has announced plans to reduce its workforce by 20%-25% this quarter and lower compensation for executives.
However, with net income down 33% to $270 million, it may take up to 104 years to pay off the $104 billion loans if the bank uses its entire profits every year to do so. The bank does have $170 billion in loans it has made, which could potentially help to pay off its own loans as they are repaid, but the situation remains delicate.