Not over yet

The San Francisco based regional lender First Republic announced after the close of the US market yesterday its results: customer deposits have plunged 41% to $104.5 billion in Q1, worse than estimated and despite the fact the US largest banks had thrown in a lifeline by parking 30 bn USD in additional liquidity at the bank. The stock plunged 20% in late trading. In order to preserve its capital base, the bank is cutting 25% of its workforce, lowers outstanding loan balances and curbs other non-essential activities. We conclude that the turbulences in US regional banks are not over yet. However, we think that most European banks are different with much stronger and conservative business models. We see no reason to reduce our investments in the space.