First Republic Loses More Than $100 Billion in Deposits; House GOP Prepares to Vote on Debt-Limit Plan By James Christie
Good day. Once the envy of the U.S. banking business, First Republic Bank reported Monday that customers withdrew more than $100 billion in deposits in March amid banking-industry turmoil. As the Federal Reserve raised interest rates, wealthy customers, no longer content to leave giant balances in bank accounts earning paltry interest, began moving money into higher-yielding alternatives. Additionally, the sudden failure of Silicon Valley Bank spooked customers with balances exceeding the Federal Deposit Insurance Corp.'s $250,000 insurance limit. First Republic said that withdrawals have since stabilized and that it would seek to bring in more deposits. Meanwhile in Washington, House Republican leaders are planning for a possible vote Wednesday or Thursday on legislation that would slash government spending in exchange for raising the U.S. borrowing limit, confident that success would force President Biden to the negotiation table. In the narrowly divided 222-213 House, Republicans can afford no more than four defections, if all Democrats vote no, as expected.
Now on to today's news and analysis.
Top News First Republic Lost $100 Billion in Deposits in Banking Panic
Customers pulled more than $100 billion in deposits out of First Republic Bank last month, when a pair of bank failures shook Americans' faith in regional lenders.
First Republic's first-quarter earnings report Monday detailed the bank's precarious financial situation following the massive withdrawals, including that profit fell 33% in the first quarter to $269 million from $401 million a year earlier. Revenue dropped 13% to $1.2 billion. Most of the quarter happened before the deposit run forced the bank to take on expensive loans from the Federal Reserve and Federal Home Loan Bank, which is likely to crimp future earnings.
McCarthy, House GOP Debt-Limit Plan Face Crucial Test This Week
Speaker Kevin McCarthy and House Republicans face a crucial test this week as they scramble to unite their factious party around a bill that would slash government spending in exchange for raising the nation's borrowing limit.
U.S. Economy Commercial Real-Estate Woes Run Deeper Than in Past Downturns
Landlords face a cyclical market downturn with changes in how people work, live and shop, and the surge in interest rates has hit property values, while remote work and e-commerce are reducing demand for office and retail space.
Sliding Diesel Prices Signal Warning
A nationwide freight slowdown has helped cut U.S. diesel prices by half from last year's record, raising concerns that parts of the world's largest economy have begun to slow .
How Supply Chains Are Being Reshaped for New Era of Global Trade
Experts say a "return to normal," as the Federal Reserve Bank of New York described its Global Supply Chain Pressure Index in February, hardly means companies will return to conventional, some would say complacent, supply chains .
Key Developments Around the World Global Military Spending Hits Record Amid Ukraine, China Tensions
The war in Ukraine and tensions over China's increased military clout pushed worldwide military spending to a record last year, and is expected to continue to boost demand for weapons.
Weapons Makers Can't Hire Enough Workers
Russian Shipbuilders Are Running Out of Parts
Russian shipbuilding behemoth United Shipbuilding Corp. is running out of key engine parts, delaying or halting the production of tankers and ocean vessels the country needs to move its oil and cargo.
Iran Ships Ammunition to Russia by Caspian Sea Russia Says Drone Boats Attack Black Sea Fleet in Crimea The Grim Life and Brutal Death of a Wagner Recruit Financial Regulation Roundup How a Star Banker Supercharged a Struggling Financial Stock
The financial world may be in a serious rough patch, but one bank stock has more than doubled over the past year, propelled by an audacious goal: turning a once-troubled Italian lender into a profit machine .
Coinbase to Face Established Rivals in International Push
To fend off a regulatory clash at home, Coinbase Global Inc. has been trying to expand into international markets. But some analysts are skeptical the company can catch up to its deeply entrenched rivals overseas.
Forward Guidance Tuesday (all times ET)
9 a.m.: S&P CoreLogic Case-Shiller Home Price Index for February
10 a.m.: U.S. new-home sales for March; The Conference Board Consumer Confidence Index for April
Wednesday
3:30 a.m.: ECB's Enria speaks at supervisory reporting conference
8 a.m.: ECB's de Guindos in panel discussion at Delphi Economic Forum VIII
8:30 a.m.: U.S. durable goods report for March
1:30 p.m.: Bank of Canada publishes summary of monetary policy deliberations
Research Riksbank to Lift Key Rate by 50 Basis Points This Week
The Riksbank is expected to raise Sweden's key interest rate by 50 basis points to 3.5% in a decision on Wednesday, while updated rate projections could go beyond what markets are pricing and signal a peak rate of roughly 4%, up from just below 3.5% last time, ING analysts write in a note. Core inflation is still well above the Riksbank's February forecast, and given the central bank meets only five times a year, it has to make each meeting count, according to the analysts. They write that, "In practice though, taking rates much higher could prove challenging given the economic and housing backdrop, and we'd argue that even another 25bp hike in June is not guaranteed."
-Dominic Chopping
German Ifo Points to Subdued Growth
The German Ifo business confidence index-Germany's main leading indicator-rose slightly in April but is still consistent with a recession, Pantheon Macroeconomics senior Europe economist Melanie Debono writes in a note. Both business confidence and the purchasing managers index have improved sharply in recent months, but still point to an economic contraction in the first quarter that extends to the second quarter, she writes. However, survey results don't always match output levels, and for now data in construction and industry sectors suggest German gross domestic product rose in the first quarter, Ms. Debono writes. "The continued rise in the surveys in April suggests that, if anything, the risk to our forecast for 2Q is likely to the upside," she adds. Germany's GDP data for the first quarter will be published Friday.
-Xavier Fontdegloria
Commentary Yes, You Can Still Sell Your House-Maybe Even Buy One
Starting with the current quarter, housing could even begin providing a modest tailwind for the U.S. economy, in a small way helping to at least temporarily keep at bay the recession so many expect, Justin Lahart writes.
India's Population Boom Is an Opportunity-and an Economic Threat
India will reach a notable milestone this year-becoming the world's most populous country, positioning it as an alternative to China as a manufacturer and, perhaps someday, the world's largest market, Megha Mandavia writes.
WSJ Pro Secondary Survey
WSJ Pro Private Equity is launching our latest annual survey of secondary market buyers. Now in its ninth year, our annual report on secondary buyers dives deep into a range of issues that shape secondary transactions, including pricing, deal structures, use of leverage and so much more. If you are a secondary investor, you can access the survey at this link .
Basis Points Global central banks including the Bank of England, the Bank of Japan, the European Central Bank and the Swiss National Bank on Tuesday said they will go back to weekly dollar swap operations with the U.S. Federal Reserve, from the daily ones they have been conducting. The central banks didn't elaborate on why but it comes as stress in the financial sector has been reduced after the collapse of three U.S. banks earlier this year. (MarketWatch) Global trade flows rose for the second straight month in February, although this revival is unlikely to be sustained for long as consumers face rising borrowing costs on top of higher food and energy prices. An indicator of goods trade flows developed by The Wall Street Journal and published Monday points to a 1.2% rise in February on month, adjusted for the seasonal fluctuations of goods exports between countries. (Dow Jones Newswires) U.S. economic growth remained sluggish for a second consecutive month, pointing to weakness at the end of the first quarter, data from the Federal Reserve Bank of Chicago showed. Its Chicago Fed National Activity Index stood at minus 0.19 in March, unchanged from February, suggesting U.S. economic activity grew below its average historical trend as the index came in below zero. Economists polled by FactSet expected the index to fall to minus 0.25. (DJN) Manufacturing activity in Texas weakened in April to its lowest reading since July, reflecting a darkened outlook as the pressures of rising interest rates and tough inflation weigh on demand for goods. The index for general business activity of the Texas Manufacturing Outlook Survey decreased from minus 15.7 in March to minus 23.4 this month, according to data released by the Federal Reserve Bank of Dallas. Economists expected the index to climb to minus 11.0, according to a consensus forecast provided by FactSet. (DJN) Mexico's inflation slowed in mid-April to its lowest level since late 2021, led by lower energy costs and declines in fresh food prices. The country's consumer-price index fell 0.16% in the first two weeks of April, led by a 12.49% drop in residential electricity rates as seasonal subsidies began in a number of cities, the National Statistics Institute said. The 12-month inflation rate slowed to 6.24%, the lowest since October 2021, from 6.85% at the end of March. (DJN) Bank of Japan Gov. Kazuo Ueda reaffirmed the bank's easy policy stance Tuesday, a few days before his first policy-setting meeting as new governor. "Given current economic, price and financial conditions, it is appropriate to continue monetary easing with current yield
(MORE TO FOLLOW) Dow Jones Newswires
04-25-23 0715ET
