It’s known for being the bank for the super rich, with oyster-fueled events for clients, glitzy Christmas parties for staff and cut-price mortgages for the well heeled.
But First Republic finds itself at the eye of the storm after being sucked into the financial crisis sparked by the collapse of Silicon Valley Bank.
Shares nosedived 67 percent in Monday morning trading while panicked customers raced to branches to empty their accounts of their huge savings.
Meanwhile trading circuit breakers were swiftly imposed to protect the market from rampant volatility as Wall Street traders tried to shut the floodgates.
It is a far cry from a few months ago, when fancy-clad First Republic bankers flocked to San Francisco for a no-expense-spared Wonka-themed Christmas party.
It also marks a dramatic downturn for a small bank that exploded over the last decade to count even Meta boss Mark Zuckerberg among its wealthy clients.
First Republic Bank is known for being the bank for the super rich, with oyster-fueled events for clients and glitzy Christmas parties for staff. Pictured: Facebook post by Robert Callan Jr. of Sothebys from inside a Willy Wonka inspired First Republic Bank Holiday Event
But shares nosedived 67 percent in Monday morning trading while panicked customers raced to branches to empty their accounts of their huge savings
It is a far cry from a few months ago, when fancy-clad First Republic bankers flocked to San Francisco for a no-expense-spared Wonka-themed Christmas party
Over the last three decades the bank has boomed from a small operation to the lender of choice for wealthy clients including Zuckerberg – who was offered a 1.05 percent mortgage rate on a $5.95M loan for his five-bedroom Palo Alto home in 2011.
Customers with median net worth of $3.3M are enticed by lavish perks including cocktail parties at its 69 branches from Manhattan to Palm Beach.
Photos and videos posted to social media in December show a glitzy Willy Wonka-themed holiday party, complete with dancers and an orchestra, at the luxury Palace Hotel in San Francisco.
The bank’s customers include businesses – the Lincoln Center and the San Francisco Ballet – as well as high-net worth individuals who are no longer happy to leave their money in low-interest accounts.
First Republic Bank – known as the bank for the uber wealthy – showered rich clients with lavish perks before stocks plunged 65 percent amid SVB Financial Group’s downfall last week.
First Republic Bank is known to be the bank for wealthy clients – like Facebook CEO Mark Zuckerberg – who was offered a 1.05 percent mortgage rate on a $5.95M loan in 2011
The bank’s customers are businesses – including the Lincoln Center and the San Francisco Ballet – as well as high-net worth individuals who are no longer happy to leave their money in low-interest accounts
First Republic, like some other financial institutions, is known for catering to the rich as ‘some are exempt from certain rules on diverse mortgage lending, while others don’t face the same potential issues because they are private banks within firms that lend broadly,’ The Wall Street Journal reported.
About three-quarters of the bank’s mortgage approvals are ‘jumbo’ loans, or loans above $417,000, the WSJ reported. And the average mortgage at First Republic is more than $1.2 million.
Many clients are on a first-name basis with their branch manager and cite personal attention as their reason for banking with the lender.
Clients have posted to social media and Glassdoor gushing about the institution, detailing appreciation parties on city rooftops, high end hotels and ballrooms in cities across the country.
A gallery of photos on the bank’s homepage shows clients at swanky gatherings and events with champagne, spreads of food and live music.
But following SVB’s fallout last week, First Republic Bank customers rushed to withdraw their money.
First Republic Bank clients have posted to social media and Glassdoor gushing about the institution, about appreciation parties held on city rooftops and high-end hotels
A gallery of photos on the bank’s homepage shows clients at swanky gatherings and events with champagne, spreads of food and live music
Clients receive free swag from First Republic Bank at an Oktoberfest event
The San Francisco-based bank said yesterday it had secured additional financing through JPMorgan, giving it access to a total of $70 billion in funds through various sources.
The bank’s chairman and CEO said in a joint statement its ‘capital and liquidity positions are very strong’ and that ‘its capital remains well above the regulatory threshold for well-capitalized banks.’
Despite the cash infusion, investment bank Raymond James double downgraded its stock to ‘market perform’ from ‘strong buy’, highlighting the risk of deposit outflows that First Republic faces from panicked large depositors after the bank run at SVB.
President Joe Biden on Monday told Americans the nation’s financial systems were safe, seeking to project calm following the swift and stunning collapse of two banks that prompted fears of a broader upheaval.
‘Your deposits will be there when you need them,’ he said.
U.S. regulators closed the Silicon Valley Bank on Friday after it experienced a traditional bank run, where depositors rushed to withdraw their funds all at once.
People line up in front of a First Republic Bank branch during rain in Los Angeles, California
Joe Biden spoke before the markets opened this morning, stating: ‘Our actions should give Americans confidence that the US banking system is safe’. It comes after White House yesterday guaranteed it would make SVB customers ‘whole’ and that ‘no losses will be borne by the taxpayer’
It is the second largest bank failure in U.S. history, behind only the 2008 failure of Washington Mutual. But the financial bloodletting was swift; New York-based Signature Bank also failed.
The president, speaking from the White House shortly before a trip to the West Coast, said he’d seek to hold those responsible accountable, and pressed for better oversight and regulation of larger banks . And he promised no losses would be borne by taxpayers.
‘We must get the full accounting of what happened,’ he said. ‘Americans can have confidence that the banking system is safe.’
Biden also said management of the banks should be fired. ‘If the bank is taken over by the FDIC, the people running the bank should not work there anymore,’ he said, referring to the Federal Deposit Insurance Corp., the agency responsible for ensuring the stability of the banking system.
At more than $110 billion in assets, Signature Bank is the third-largest bank failure in U.S. history. Another beleaguered bank, First Republic Bank, announced Sunday that it had bolstered its financial health by gaining access to funding from the Fed and JPMorgan Chase.
Staff arrive at the SVB headquarters on Monday morning while customers line up to withdraw their funds in Santa Clara, California
The developments left markets jittery as trading began Monday. The Asian and European markets fell and while U.S. markets traded higher, shares in midsized commercial banks were hammered despite assurances from Biden.
The Bank of England and U.K. Treasury said early Monday that they had facilitated the sale of a Silicon Valley Bank subsidiary in London to HSBC, Europe’s biggest bank, ensuring the security of 6.7 billion pounds ($8.1 billion) of deposits.
In an effort to shore up confidence in the banking system, the Treasury Department, Federal Reserve and FDIC said Sunday that all Silicon Valley Bank clients would be protected and able to access their money.
Under the plan, depositors at Silicon Valley Bank and Signature Bank, including those whose holdings exceed the $250,000 insurance limit, will be able to access their money on Monday.
Among the bank’s customers are a range of companies from California’s wine industry , where many wineries rely on Silicon Valley Bank for loans, and technology startups devoted to combating climate change.