Marketbites: First Republic Bank Stock Tumbles
Portfolio Manager Commentary:
Stocks slid Tuesday after First Republic Bank's earnings report reignited concerns about the broader sector. First Republic Bank stock tumbled more than 49% after the regional bank posted its latest earnings results. The bank announced that deposits dropped 40% to $104.5 billion in the first quarter but have since stabilized. First Republic will also be trimming expenses, including slashing headcount by 20-25% in the 2nd quarter. Bloomberg News reported Tuesday that the bank was trying to sell as much as $100 billion of loans and securities to restructure its balance sheet.
The regional bank has been closely watched after investors grew concerned it could face the same fate as Silicon Valley Bank and Signature Bank, whose closures set off an industry crisis last month. First Republic shares have collapsed more than 93% so far this year.
Traders also fretted over a disappointing earnings report from UPS, which dropped about 10% after the company missed expectations and management said sales volumes were — and should continue to be — under pressure. PepsiCo, on the other hand, rose 2.3% on better-than-expected numbers.
Chart of the Day:
Commercial real estate has experienced its share of busts in recent decades. This one is different. Landlords are contending simultaneously with a cyclical market downturn and with secular changes in the way people work, live and shop. The sudden surge in interest rates caused property values to fall, while the increases in remote work and e-commerce are reducing demand for office and retail space. The U.S. office vacancy rate reached a milestone in the first quarter when it rose to 12.9%, exceeding the peak vacancy rate during the 2008 financial crisis. Despite low unemployment, that figure marked the highest vacancy rate since data firm CoStar Group Inc. began tracking it in 2000.
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