Many banks still face tough economic conditions, but no other prominent lenders appeared to have a similar set of urgent challenges. That was underlined over the past few weeks as dozens of regional banks reported their first-quarter earnings, offering a less-grim assessment of their prospects than many investors and analysts had feared.
“The problems at First Republic were visible already on March 10,” Nicolas Véron, a senior fellow at the Peterson Institute for International Economics, said, referring to the day Silicon Valley Bank collapsed. “To me, this is just a leftover from the previous episode. The only surprise here is that it’s taken so long.”
First Republic lost $102 billion in deposits in the first quarter, but withdrawals at other banks stabilized much more quickly. PacWest Bancorp, a Los Angeles lender, lost nearly $6 billion in deposits during the quarter — but by late March, the outflows had reversed, according to executives. Western Alliance, an Arizona bank that has also drawn scrutiny, added $2 billion in deposits in the first half of April.
The KBW regional bank index, an index of smaller regional lenders in the United States, lost little ground even as First Republic’s stock was in free fall, a signal that investors viewed First Republic as an isolated problem, rather than a harbinger of more trouble to come. That’s a message many bank executives have also tried to send as they distanced themselves from their stricken rivals.
It’s a distinctly different response than investors had in March. After the sudden collapse of Silicon Valley Bank, banking indexes plunged, dragging the broader stock market lower amid fears of a credit crunch and spiraling economic crisis. In the weeks since, including the first trading session after First Republic’s demise, the S&P 500 has posted a series of gains, putting First Republic’s troubles in sharper relief.