First Republic Bank (FRC) stock tanked to new lows Tuesday after revealing massive deposit outflows in its late Monday earnings. That follows mixed reports last week by Salt Lake City-based Zions Bancorp, Phoenix-based Western Alliance Bancorp as well as superregionals Truist Financial (TFC), Key Corp (KEY), Comerica (CMA) and Regions Financial (RF).
XThe collapse in March of SVB Financial's Silicon Valley Bank and Signature Bank of New York triggered system-wide shockwaves and extreme volatility in banking stocks. Western regional banks, led by Zions and Western Alliance, were hard hit and scrutinized for exposure to market that had affected SVB and SBNY.
Going into the quarter, analysts expected most regional banks will report lower deposit levels as customers rushed to larger institutions. Still, Wall Street expects to see some moderate earnings growth, driven by increases in net interest income. Superregional peer PNC Financial Services (PNC) posted mixed results Friday and provided a soft revenue guidance. However, firms may not feel the full impacts from March until 2024, according to Morgan Stanley, which cut its 2023 and 2024 outlook for regional banks in early April.
First Republic Bank
Heavily-battered First Republic detailed its massive deposit outflows in its earnings beat late Monday after delaying their results in earlier this month.
Shares crumbled to new lows on Tuesday after Bloomberg reported First Republic is considering selling $50 billion to $100 billion in long-term securities and mortgages as part of its rescue strategy.
The company is trying to reduce its asset-liability mismatch and shore up its balance sheet to avoid being seized by the FDIC. First Republic may offer potential buyers warrants or preferred equity as an incentive to purchase the assets above market value, according to people familiar with the matter.
First Republic may also need the government's help negotiating another injection from the largest banks to stabilize it during the attempted turnaround, Bloomberg reported.
In the earnings report, First Republic said it will cut 20%-25% of jobs in the second quarter and is exploring strategic alternatives.
Results: First Republic earnings dropped 38.5% to $1.23 per share while revenue fell 13.4% to $1.2 billion.
Expectations: Wall Street expected adjusted earnings to plummet 59% to 82 cents per share on a 12.9% revenue decline to $1.22 billion. GAAP earnings were see falling 52.5% to 95 cents per share.
Total deposits cratered 35.5% from last year to $104.5 billion as of March 31, even with the $30 billion injected from the biggest banks. Deposits declined by $72 billion during the quarter, down 40.8% from year-end. FactSet analysts projected deposits dropping to $145 billion.
First Republic said deposits have stabilized in April, but have dipped to $102.7 billion as of April 21.
San Francisco-based First Republic received $100 billion in funds in March between rescue deposits from major banks and tapping into the Fed's lending facility.
Borrowings rocketed to $106.7 billion, up $101.2 billion from last year. The bank lowered its provision for credit losses to $16 million, down from $30 million in Q4.
FRC stock plunged 49% Monday to close at a record low of 8.12. Shares surged 12.2% to 16 in Monday's regular session, the S&P 500's top performer of the day. FRC stock tanked 93% so far this year as it suffered massive deposit outflows.
Western Alliance
Results: Western Alliance reported late on April 18 that adjusted earnings rose 3.6% to $2.30 per share while adjusted revenue leapt nearly 27% to $712.2 million.
Expectations: Analysts polled by FactSet saw Western Alliance adjusted earnings sliding to $2.05 per share on 20% revenue growth to $670 million.
Total deposits fell 8.8% over the year to $47.59 billion, below FactSet forecasts of $52.56 billion. Deposits were down 11.3% from Q4.
Phoenix-based Western Alliance noted deposits stabilized at the end of the quarter, increasing an additional $2 billion from March 31 to April 14. Total insured deposits increased to 73% of Western Alliance's total deposits, up from 68% that the firm announced in its early April update ahead of its earnings report.
Western Alliance increased its provisions for credit losses to $19.4 million for Q1, compared to $3.1 million at year-end and $9 million in Q1 2022.
Outlook: For fiscal 2023, FactSet analysts project earnings will fall 15.4% to $8.21 per share while revenue increases 6% to $2.744 billion.
WAL stock surged 24% on April 19 and 28% for the week ended April 21. WAL stock crumbled 65% at the beginning of March as investors fled regional banks.
Western Alliance fell 5.9% on Monday, April 24. Shares fell modestly after First Republic's Q1 results.
Zions
Results: Zions earnings rose 4.7% to $1.33 per share while revenue spiked 19.5% to $830 million. Adjusted revenue rose 20.5% to $850 million.
Expectations: Wall Street saw Zions Bancorp (ZION) earnings jumping 20% to $1.53 per share as revenue leapt 23% to $845 million.
Deposits fell to $69.2 billion for the quarter, down 3.3% from Q4 and 16% from last year. Analysts predicted deposits would slide to $69.5 billion.
Zions' deposits, excluding brokered deposits, were 18% greater than pre-pandemic levels in Q4 2019, CEO Harris Simmons noted.
Lending loosened as loans and leases rose 10% to $56.3 billion.
Zions increased its provision for credit losses to $45 million, up $2 million from Q4. Last year Zion reported a negative provision of $33 million.
Outlook: Experts forecast Zions full year adjusted earnings ticking up 1% to $5.85 per share on 6% revenue growth to $3.34 billion.
ZION stock retreated 4.9% on April 20 and 2% for the week ended April 21, reversing lower after rallying just ahead of results. The stock price nearly halved during its March plummet and is trading close to two-year lows.
Zions fell 5.5% on Monday, April 24 following FRC's results.
Truist Financial
Results: Truist Financial earnings rose 6% to $1.05 per share on 15% revenue growth to $6.15 billion.
Expectations: FactSet analysts guided earnings jumping to $1.14 per share on roughly $6 billion in revenue.
Deposits slid to $408 billion, down from $413 billion in Q4 and $415 billion last year, respectively. Truist increased its provision for credit losses to $502 billion, up from $467 billion at year-end. Last year Truist reported a reserve release of $95 billion.
Net interest income leapt 22% year over year to $3.92 billion.
Outlook: FactSet guides Truist full-year earnings rallying 6% to $4.72 per share while revenue climbs 7.5% to $24.94 billion.
TFC stock fell 3.8% on April 20 following results and 5.35% for the week.
Shares weakened 4.3% on Monday, April 24.
Truist tumbled 37% over the past three months and are down 29% so far this year.
KeyCorp
Results: KeyCorp earnings tumbled 33% to 30 cents per share on a 1.1% increase in revenue to $1.71 billion. The earnings results included a 14 cent per share build-up to its allowance for credit losses
Expectations: Wall Street projected earnings at 44 cents per share on $1.79 billion in revenue.
Key increased its allowance for credit loses to $1.66 billion, up 6% from Q4 and 30% from last year, respectively. The company increased its provision for credit losses to $139 million from $83 million in 2022.
Average deposits fell by $6.8 billion to $143.4 billion.
Outlook: For the year, analysts expect KeyCorp earnings to decline 5.2% to $1.82 per share while revenue nudges down 1.3% to $7.18 billion.
KEY stock carved 3.7% lower on April 21 and 4.1% for the week.
Shares slid 5.6% on April 24 to their worst close since May 2020.
KeyCorp swooned roughly 40% in 2023.
Comerica
Results: Comerica earnings rocketed 74% to $2.39 per share. The company didn't report a specific revenue number but said it declined 2.9% from Q4, which would indicate a 41.4% year-over-year leap to $990 million.
Expectations: Analysts estimated earnings rising to $2.29 per share on $968 million in revenue.
Average deposits fell to $67.83 billion, down 4.9% from Q4 and 14.2% from last year, respectively. Comerica reduced its provision for credit losses by $3 million from year-end to $30 million in Q1.
CMA stock fell 2.7% on April 20 following earnings, paring big weekly gains to just 1%.
Shares declined 4.5% on April 24.
Comerica crumbled 39% so far this year.
Regions Financial
Results: Regions Financial earnings jumped nearly 13% to 62 cents per share on a 22% spike in revenue to $1.95 billion.
Expectations: Wall Street anticipated earnings of 65 cents per share on $1.97 billion of revenue, according to FactSet.
Net interest income ballooned 40% over the year to $1.42 billion. Total average deposit balances fell to $129 billion, down 3% from Q4 and 7% from last year, respectively.
Regions increased its provision for credit losses to $135 million from $112 million last quarter. In 2022, Regions Financial reported a $36 million benefit from its credit loss provisions.
Outlook: FactSet projects Regions Financial full-year earnings rising 7.8% to $2.46 per share on 9% revenue growth to $6.99 billion.
RF stock slid 2.8% on April 21 following results, but just 0.8% for the week.
Regions Financial dipped 2.6% on April 24.
Shares fell 17.4% in 2023.
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