Contagion spreading to broader sector? Investors and depositors leaving for (even more) risk off ventures? Just want to discuss
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No. Not really.
This entire conversation is over a month late.
The risk was when it was not entirely certain that the FDIC was going to backstop uninsured deposits at Signature and SVB. Once they did that, things have been by and large fine.
Agree with above. Think the bank is done and will be seized or acquired within the next week or so, but the FDIC is pretty clearly not willing to leave uninsured depositors out in the cold. The regional banks index was flat this week even after a massive FRC meltdown - as long as uninsured depositors are protected with these failures, think the contagion is limited to just FRC.
In a week or 6 months or a year this statement may sound completely stupid, but for what it's worth, First Republic was probably idiosyncratic in that it, like SVB, had outsized exposure to VC deposits + it had some decent exposure to Northern California office (I think close to 10% of its loan portfolio, though I look at so many banks I might be conflating them with someone else), an asset class that is sucking wind, and excessive RMBS exposure and associated losses. It's really these California-oriented/West coast-focused banks that are feeling the real pain right now. Banks like PacWest and Avid, for example, are also up against the ropes. Though, who knows? A trickle could turn into a tsunami--things sometimes happen slowly and then quickly. So, who really knows?
As someone with quite a few FRB accounts including at one time seven figures sitting in the accounts, and I’m a big big fan of their service; however, their high touch service model is predicated on having checking accounts with high dollar figures beyond the FDIC limits.
FRB business banking is different from the larger banks in that their customer service is top tier (1:45pm PST wire transfers, they can help with that).
with the capital outflows, they become just another bank (undifferentiated) that had a very dedicated team, which prob has too many FTEs. Their lending was ridiculously conservative, but seems like they bended over backwards for the ultra high net worth (I not one of them).
would be a shame that they go under
they were making a big growth initiative into PWM.
Yeah, I think they had something like 62% of their loan portfolio in residential, which is unheard of in modern banking, and weird loans from an economic standpoint, e.g., word has it that Mark Zuckerberg had a $6(?) million loan at a 1% interest rate. They definitely had a somewhat unique profile.
Did you have a mortgage with them? If so when did you originate and what was the rate/term (ex 30 year fixed conventional). I'm interested in knowing how low they went on rates. I assume many of their loans were portfolio loans.
I never did get a loan from them (personal or business). They are known to be very conservative for the traditional borrower profile.
JPM just big dicking the financial sector having the government basically pay them to take money. God knows all those FRC analysts are hard as rocks changing their LinkedIn to JPM haha
What is JPM now? A $4 trillion asset bank? At what point does the federal government say that a bank can't take FDIC insurance and be heavily regulated by the federal government and also de-bank customers based on religious and political beliefs?
It's adorable to think the Federal government can make JPM do anything. Anytime they try Jamie will just look at them like
I am pretty unhappy.
First Republic was special.
First, as others have correctly alluded, while their underwriting was very conservative on an LTV basis, the best thing was that they would finance more esoteric things or be more accommodating than the mainline banks.
For a vanilla example, if I have a $10m stock portfolio with a diversified basket of 20 large-cap stocks, most private banks are going to offer me something like 55%-65% LTV against that. First Republic is going to offer me 40%, and if I complain, maximum 50%.
A less common example would be earned but undistributed carry. The traditional thing is that if your firm has a lending program in place for the general partnership, that bank will be all over you for a capital call LOC. First Republic went farther and would be willing to look at carry allocations in older vintages as collateral for a different LOC (as in, not related to future capital commitments as part of the firm's program). If they can see that my carry is worth $10m on paper, they may haircut that by 50% as a margin of safety (so they consider $5m the actual collateral value), then offer me a 20% LTV against that. I now have a $1m line. Again, not aggressive on a percentage basis, but accommodating on what constitutes collateral itself.
The rest is gravy. Aviation, art, interest-only mortgage, second-home mortgage ...
Secondly, their service was just night and day different. Calling them is a pleasure. Stopping into a branch is a pleasure. You could get wires out after cutoff: I have been able to get something to post with that day's Fed number as late as 6:30 Eastern. My 'pod' had both East Coast and West Coast people in it; if I was calling after 5:00 with a question or account service need, I could get someone still in the office in California. Everyone was pleasant and genuinely happy to go figure out how to help you with what you needed.
I am used to getting sold the dream of customer service with UHNW products or services. Rarely does it actually show up. And the best thing is that what I've written was consistently true from the time I became an account holder with less than a tenth of the balances I have today.
Rebranding the branches to the Chase brand and killing the logo and website over the coming months is a stupid and shortsighted move. The loyalty a lot of people have to the First Republic franchise is remarkable. I am aware of Chase's product offerings. The Private Bank is not as personal.
It's frustrating. I'll miss it for sure.
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