Shares in First Republic Bank tank after lender says customers withdrew $100B in deposits

Shares in regional U.S. bankFirst Republic Bank fell another 15 per cent on Wednesday, a day after plunging to an all-time low after the mid-sized lender revealed that customers withdrew $100 billion US worth of deposits in the first quarter.

Shares in the California-based bank were changing hands for less than $7 US each in premarket trading on Wednesday. That's down from $16 on Monday and $120 at the start of March, before the U.S. banking sector was gripped by contagion fears in the fallout of the collapse of Silicon Valley Bank.

The bank is the latest U.S. lender hit by a so-called run on the bank,where depositors move to withdraw their money en masse from a bank deemed to be in trouble. Such runs tend to exacerbate whatever problems the bank had in the first place, creating a vicious cycle of negativity.

The bank's earnings on Monday revealed that the lender made$269 million US in profit last quarter on revenues of more than $1.2 billion, both down slightly from last year.But investors were far more concerned withthe bank's net loss of deposits during the quarter: $100 billion.

"With the closure of several banks in March, we experienced unprecedented deposit outflows,"chief financial officer Neal Holland said.

Still 'significant challenges' for bank

Colin Cieszynski, a market strategist with SIA Wealth Management in Toronto, said the market reaction to the deposit plunge makes sense because it was "just an astronomical number ... and then they had $30 billion in backstops from from other banks that support them."

The bank says it is pursuing "strategic options" to improve its capital position, a plan that could include asset sales to raise money,or the creationof a so-called bad bank where any toxic or money-losing assets would be carved off and placed into a new entity, leaving the remaining bank healthy.

"The bottom line is they may need to raise capital, they're probably going to have to layoff staff and and they still have ... a lot of significant challenges,"Cieszynski told CBC News in an interview.

At least three brokerages have cut their price targets on First Republic's shares since it reported first-quarter earnings on Monday.

Cieszynskisaid First Republic has brought back old fears about the banking sector that the market had put to rest.

"Acouple of weeks ago people were saying, 'Maybe this is all over and it's been dealt with,' [but] it's now clear that this isn't completely over, and even if things aren't spiraling out of control there's still going to be a lot of mopping up to do from what's already happened."