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Your Bank: “Use This as an Early Warning Signal”

First Republic Bank “customers had pulled $100 billion in deposits in the first quarter”

by Bob Stokes
Updated: April 27, 2023

More dramatic news on the banking front.

On April 25, investors in the shares of First Republic Bank were hit hard (The New York Times):

First Republic Bank Enters New Free Fall as Concerns Mount

The bank's shares fell by about 50 percent on Tuesday, a day after it said customers had pulled $100 billion in deposits in the first quarter.

As of this writing on April 26, shares are down another 20% intraday.

Of course, there was no way of knowing the precise percentage decline of the bank's shares ahead of time, but we can say that the dramatic developments were no surprise to our Head of Global Research Murray Gunn.

On March 31, when our April Global Market Perspective published, Murray showed this chart and said:


Use this for [an] early warning signal...

...Look at the relative performance of bank shares. If what's going on behind the closed door of banks is all good, the share price should probably not be UNDERperforming its peers. The chart shows that the relative performance of First Republic versus the KBW Bank Index topped out in November 2020. The relative performance had been trending down for many months before problems emerged.

The worry is that investors' confidence in other regional banks -- indeed, the entire banking sector -- could become even more shaken.

On that note, also in the April Global Market Perspective, Murray provides a table of banks under the heading of "Bank Health Monitor." You can see the performance trend of twenty-one banks relative to the bank index. Your bank might be on the list.

Even if it's not, Murray Gunn's ongoing commentary in our Global Market Perspective (the new May Global Market Perspective publishes April 28) will provide many insights which should be of interest to bank depositors and those who want to know what's going on in the global financial system.

You can learn more about our Global Market Perspective by following the link below.

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