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    JPMorgan, Citigroup and Wells Fargo Report Better-than-Expected Profits

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    The NewsThree of the biggest banks in the United States made a cumulative $22.3 billion in profit last quarter, a hefty jump from the same period last year, the lenders reported Friday.The largest bank in the nation, JPMorgan Chase, led the way with $14.5 billion in profit, helped by growth virtually across the board, including increases in lending and credit-card transactions. Wells Fargo pulled in $4.9 billion and Citi earned $2.9 billion in the quarter. All of the earnings were higher than analysts had expected.JPMorgan Chase’s headquarters in New York. The bank made $14.5 billion in profit last quarter.Haruka Sakaguchi for The New York TimesWhy It MattersGiven its size, JPMorgan in particular is a proxy for the banking industry. Jamie Dimon, the bank’s chief executive, has deep political connections, and his prognostications on the economy are scrutinized in some circles as closely as a central banker’s musings.On Friday, Mr. Dimon told analysts that he expected the U.S. economy to experience “a soft landing, mild recession or a hard recession,” though he didn’t put a time frame on the prediction. “Obviously, we shall hope for the best,” he said.In its latest report, the bank listed a litany of risks, including that consumers are burning through their cash buffers and that inflation remains high. Last quarter, JPMorgan lost $900 million on investments in U.S. Treasury bonds and mortgage-backed securities, which have dropped in value as rates have risen — but that was barely a dent in its results.Wells Fargo, one of the nation’s largest mortgage lenders, is watched by analysts for signs of economic stress. The U.S. economy “continues to perform better than many had expected,” said Charles W. Scharf, the bank’s chief executive.The bank said Friday that soured loans in its commercial business had increased, but that its consumer business had held fairly steady, with a slight rise in credit-card defaults offset by a drop in losses on auto loans. Commercial real estate, especially loans on office space, is a pain point, and the bank set aside nearly $1 billion more for losses.Unlike the other banks, Citigroup reported a fall in second-quarter profit, although the decline was not as severe as analysts had predicted. “The long-awaited rebound in investment banking has yet to materialize, making for a disappointing quarter,” Citi’s chief executive, Jane Fraser, said in a statement.BackgroundThe three major banks that reported earnings Friday have been all over the news this year, thanks to their prominent role attempting to be a stabilizing force during the spring banking crisis that felled three smaller lenders. JPMorgan bought one of those failed banks, First Republic. In an indication of how troubled that institution had become, JPMorgan said Friday that it was setting aside $1.2 billion to deal with losses in First Republic’s lending portfolio.Analysts still expect the acquisition to prove worthy in the end, thanks to First Republic’s base of wealthy clients and coastal branches, which Friday’s results show are already buoying JPMorgan’s asset and wealth management arms.The U.S. government debt-limit standoff in April and May was also reflected in the banks’ results, with Citi citing anxiety during the negotiations as pushing investment-banking clients to the “sidelines” during the second quarter.What’s NextIn the next week or so, a slew of other banks will report quarterly earnings. Among the most closely watched will be Wednesday’s results from Goldman Sachs, which has hinted publicly of a disappointing stretch, and regional banks like Western Alliance and Comerica, which will be looking to prove they have bounced back from their recent troubles. More

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    G.M.’s Sales Jumped 19% in the Second Quarter

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    General Motors, Toyota and other automakers sold more trucks and sport utility vehicles as supply chain problems eased and demand remained strong despite rising interest rates.Some of the country’s biggest automakers reported big sales increases for the second quarter on Wednesday, the strongest sign yet that the auto industry was bouncing back from parts shortages and overcoming the effects of higher interest rates.General Motors, the largest U.S. automaker, said it sold 691,978 vehicles from April to June, up 19 percent from a year earlier. It was the company’s highest quarterly total in more than two years.Automakers have struggled in the last two years with a shortage of computer chips that forced factory shutdowns and left dealers with few vehicles to sell. More recently, rising interest rates have made auto loans more expensive, causing some consumers to defer purchases or opt for used vehicles.“I’m not saying we are on the cusp of exciting growth here,” said Jonathan Smoke, chief economist at Cox Automotive, a research firm. “But we are now at a turning point where the auto market returns to more balance. It’s the beginning of returning to normal.”The easing of chip shortages has allowed automakers to restock dealer lots, making it easier for car buyers to find the models and features they want, Mr. Smoke said. At the end of June, dealers had about 1.8 million vehicles in stock, nearly 800,000 more than at the same point in 2022, according to Cox data.Sales have also been helped by strong job creation and rising wages, Mr. Smoke said.At the same time, however, higher interest rates and higher car prices have put new-car purchases out of reach of many consumers. In the first half of the year, the average price paid for a new vehicle was a near-record $48,564. The average interest rate paid on car loans in the first six months of 2023 was 7.09 percent, up from 4.86 percent a year earlier, according to Cox. The average monthly payment in the first half was $784, up from $691.“Demand will be limited by the level of prices and rates, which are not likely to come down enough to stimulate more demand than the market can bear,” Mr. Smoke said.Cox estimated that total sales of new cars and trucks rose 11.6 percent in the first half of the year, to 7.65 million. The firm now expects full-year sales to top 15 million, which would be a rise of 8 percent.Several automakers reported solid quarterly sales on Wednesday. Toyota said its U.S. sales rose 7 percent, to 568,962 cars and light trucks. Stellantis, the company that owns Jeep, Ram, Chrysler and other brands, reported a 6 percent rise, to 434,648 vehicles.Honda, which had been severely hampered by chip shortages, said its sales rose 45 percent to 347,025 cars and trucks. Hyundai and Kia, the South Korean automakers, each sold more than 210,000 vehicles, posting gains of 14 percent and 15 percent.Electric vehicles remain the fastest-growing segment of the auto industry. Rivian, a maker of electric pickup trucks and sport utility vehicles, said on Monday that it delivered 12,640 in the second quarter, a 59 percent jump from a year earlier. And on Sunday, Tesla reported an 83 percent jump in global sales in the second quarter.Cox estimated that more than 500,000 electric vehicles were sold in the United States in the first six months of the year, and that more than one million would be sold in 2023, setting a record for battery-powered cars and trucks in the country.Tesla, which does not break out its sales by country, remains the largest seller of E.V.s in the U.S. market. Cox estimated that the company sold more than 161,000 electric cars in the second quarter in the United States. Ford Motor, which offers three fully electric models., reports its quarterly sales on Thursday.G.M. sold more 15,300 battery-powered cars and trucks, but nearly 14,000 were the Chevrolet Bolt, a smaller vehicle that the company will stop making at the end of the year. The company also sold 1,348 Cadillac Lyriq electric S.U.V.s and 47 GMC Hummer pickup trucks. Chevrolet will soon start delivering a new electric Silverado pickup truck, which uses the same battery technology as the Lyriq and Hummer. More

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    Companies Push Prices Higher, Protecting Profits but Adding to Inflation

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    Corporate profits have been bolstered by higher prices even as some of the costs of doing business have fallen in recent months.The prices of oil, transportation, food ingredients and other raw materials have fallen in recent months as the shocks stemming from the pandemic and the war in Ukraine have faded. Yet many big businesses have continued raising prices at a rapid clip.Some of the world’s biggest companies have said they do not plan to change course and will continue increasing prices or keep them at elevated levels for the foreseeable future.That strategy has cushioned corporate profits. And it could keep inflation robust, contributing to the very pressures used to justify surging prices.As a result, some economists warn, policymakers at the Federal Reserve may feel compelled to keep raising interest rates, or at least not lower them, increasing the likelihood and severity of an economic downturn.“Companies are not just maintaining margins, not just passing on cost increases, they have used it as a cover to expand margins,” Albert Edwards, a global strategist at Société Générale, said, referring to profit margins, a measure of how much businesses earn from every dollar of sales.PepsiCo, the snacks and beverage maker, has become a prime example of how large corporations have countered increased costs, and then some.Hugh Johnston, the company’s chief financial officer, said in February that PepsiCo had raised its prices by enough to buffer further cost pressures in 2023. At the end of April, the company reported that it had raised the average price across its products by 16 percent in the first three months of the year. That added to a similar size price increase in the fourth quarter of 2022 and increased its profit margin.“I don’t think our margins are going to deteriorate at all,” Mr. Johnston said in a recent interview with Bloomberg TV. “In fact, what we’ve said for the year is we’ll be at least even with 2022, and may in fact increase margins during the course of the year.”The bags of Doritos, cartons of Tropicana orange juice and bottles of Gatorade drinks sold by PepsiCo are now substantially pricier. Customers have grumbled, but they have largely kept buying. Shareholders have cheered. PepsiCo declined to comment.PepsiCo is not alone in continuing to raise prices. Other companies that sell consumer goods have also done well.The average company in the S&P 500 stock index increased its net profit margin from the end of last year, according to FactSet, a data and research firm, countering the expectations of Wall Street analysts that profit margins would decline slightly. And while margins are below their peak in 2021, analysts are forecasting that they will keep expanding in the second half of the year.For much of the past two years, most companies “had a perfectly good excuse to go ahead and raise prices,” said Samuel Rines, an economist and the managing director of Corbu, a research firm that serves hedge funds and other investors. “Everybody knew that the war in Ukraine was inflationary, that grain prices were going up, blah, blah, blah. And they just took advantage of that.”But those go-to rationales for elevating prices, he added, are now receding.The Producer Price Index, which measures the prices businesses pay for goods and services before they are sold to consumers, reached a high of 11.7 percent last spring. That rate has plunged to 2.3 percent for the 12 months through April.The Consumer Price Index, which tracks the prices of household expenditures on everything from eggs to rent, has also been falling, but at a much slower rate. In April, it dropped to 4.93 percent, from a high of 9.06 percent in June 2022. The price of carbonated drinks rose nearly 12 percent in April, over the previous 12 months.“Inflation is going to stay much higher than it needs to be, because companies are being greedy,” Mr. Edwards of Société Générale said.But analysts who distrust that explanation said there were other reasons consumer prices remained high. Since inflation spiked in the spring of 2021, some economists have made the case that as households emerged from the pandemic, demand for goods and services — whether garage doors or cruise trips — was left unsated because of lockdowns and constrained supply chains, driving prices higher.David Beckworth, a senior research fellow at the right-leaning Mercatus Center at George Mason University and a former economist for the Treasury Department, said he was skeptical that the rapid pace of price increases was “profit-led.”Corporations had some degree of cover for raising prices as consumers were peppered with news about imbalances in the economy. Yet Mr. Beckworth and others contend that those higher prices wouldn’t have been possible if people weren’t willing or able to spend more. In this analysis, stimulus payments from the government, investment gains, pay raises and the refinancing of mortgages at very low interest rates play a larger role in higher prices than corporate profit seeking.“It seems to me that many telling the profit story forget that households have to actually spend money for the story to hold,” Mr. Beckworth said. “And once you look at the huge surge in spending, it becomes inescapable to me where the causality lies.”Mr. Edwards acknowledged that government stimulus measures during the pandemic had an effect. In his eyes, this aid meant that average consumers weren’t “beaten up enough” financially to resist higher prices that might otherwise make them flinch. And, he added, this dynamic has also put the weight of inflation on poorer households “while richer ones won’t feel it as much.”The top 20 percent of households by income typically account for about 40 percent of total consumer spending. Overall spending on recreational experiences and luxuries appears to have peaked, according to credit card data from large banks, but remains robust enough for firms to keep charging more. Major cruise lines, including Royal Caribbean, have continued lifting prices as demand for cruises has increased going into the summer.Many people who are not at the top of the income bracket have had to trade down to cheaper products. As a result, several companies that cater to a broad customer base have fared better than expected, as well.McDonald’s reported that its sales increased by an average of 12.6 percent per store for the three months through March, compared with the same period last year. About 4.2 percent of that growth has come from increased traffic and 8.4 percent from higher menu prices.The company attributed the recent menu price increases to higher expenses for labor, transportation and meat. Several consumer groups have responded by pointing out that recent upticks in the cost of transportation and labor have eased.A representative for the company said in an email that the company’s strong results were not just a result of price increases but also “strong consumer demand for McDonald’s around the world.”Other corporations have found that fewer sales at higher prices have still helped them earn bigger profits: a dynamic that Mr. Rines of Corbu has coined “price over volume.”Colgate-Palmolive, which in addition to commanding a roughly 40 percent share of the global toothpaste market, also sells kitchen soap and other goods, had a standout first quarter. Its operating profit for the year through March rose 6 percent from the same period a year earlier — the result of a 12 percent increase in prices even as volume declined by 2 percent.The recent bonanza for corporate profits, however, may soon start to fizzle.Research from Glenmede Investment Management indicates there are signs that more consumers are cutting back on pricier purchases. The financial services firm estimates that households in the bottom fourth by income will exhaust whatever is collectively left of their pandemic-era savings sometime this summer.Some companies are beginning to find resistance from more price-sensitive customers. Dollar Tree reported rising sales but falling margins, as lower-income customers who tend to shop there searched for deals. Shares in the company plunged on Thursday as it cut back its profit expectations for the rest of the year. Even PepsiCo and McDonald’s have recently taken hits to their share prices as traders fear that they may not be able to keep increasing their profits.For now, though, investors appear to be relieved that corporations did as well as they did in the first quarter, which has helped keep stock prices from falling broadly.Before large companies began reporting how they did in the first three months of the year, the consensus among analysts was that earnings at companies in the S&P 500 would fall roughly 7 percent compared with the same period in 2022. Instead, according to data from FactSet, earnings are expected to have fallen around 2 percent once all the results are in.Savita Subramanian, the head of U.S. equity and quantitative strategy at Bank of America, wrote in a note that the latest quarterly reports “once again showed corporate America’s ability to preserve margins.” Her team raised overall earnings growth expectations for the rest of the year, and 2024. More

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    First Republic Lurches as It Struggles to Find a Savior

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    The bank is sitting on big losses and paying more to borrow money than it is making on its loans to homeowners and businesses.First Republic Bank is sliding dangerously into a financial maelstrom, one from which an exit appears increasingly difficult.Hardly a household name until a few weeks ago, First Republic is now a top concern for investors and bankers on Wall Street and officials in Washington. The likeliest outcome for the bank, people close to the situation said, would need to involve the federal government, alone or in some combination with a private investor.While the bank, with 88 branches focused mostly on the coasts, is still open for business, no one connected to it, including its executives and some board members, would say how much longer it could exist in its current form.First Republic, based in San Francisco, has been widely seen as the most in-danger bank since Silicon Valley Bank and Signature Bank collapsed last month. Like Silicon Valley Bank, it catered to the well-off — a group of customers able to pull their money en masse — and amassed a hoard of loans and assets whose value has suffered in an era of rising interest rates.Yet while SVB and Signature survived just days under pressure, First Republic has neither fallen nor thrived. It has withstood a deposit flight and a cratering stock price. Every attempt by the bank’s executives and advisers to project confidence appears to have had the opposite effect.The bank’s founder and executive chairman, Jim Herbert, until recently one of the more admired figures in the industry, has disappeared from public view. On March 13, Jim Cramer, the CNBC host, said on the air that Mr. Herbert had told him that the bank was doing “business as usual,” and that there were “not any sizable number of people wanting their money.”That was belied by the bank’s earnings report this week, which stated that “First Republic began experiencing unprecedented deposit outflows” on March 10.Neither Mr. Herbert nor the bank’s representatives would comment Wednesday, as First Republic’s stock continued a harrowing slide, dropping about 30 percent to close the day at just $5.69 — down from about $150 a year earlier. On Tuesday, the stock plummeted 49 percent. The company is now worth a little more than $1 billion, or about one-twentieth its valuation before the banking turmoil began in March.In what has become a disquieting pattern, the New York Stock Exchange halted trading in the shares 16 times on Wednesday because volatility thresholds were triggered.

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    First Republic Bank’s share price
    Source: FactSetBy The New York TimesStock prices are always an imperfect measure of a lender’s health, and there are strict rules about what types of entities can acquire a bank. Still, First Republic’s stock slide means that its branches and $103 billion in deposits could be bought for, theoretically, an amount less than the market capitalization of Portillo’s, the Chicago-area hot dog purveyor. Of course, any company that buys First Republic would be taking on multibillion-dollar losses on its loan portfolio and assets.The bank is more likely to fall into the hands of the government. That outcome would likely wipe out shareholders and put the bank’s fate in the hands of the Federal Deposit Insurance Corporation.The F.D.I.C. by its own rules guarantees that deposit accounts only up to $250,000 will be made whole, though in practice — and in the case of SVB and Signature — it can make accounts of all sizes whole if several top government officials invoke a special legal provision. Of First Republic’s remaining deposits, roughly half, or nearly $50 billion, were over the insured threshold as of March 31, including the $30 billion deposited by big banks in March.In conversations with industry and government officials, First Republic’s advisers have proposed various restructuring solutions that would involve the government, in one form or another, according to people familiar with the matter. The government could seek to minimize a buyer’s financial risk, the people said, asking not to be identified.Thus far, the Biden administration and Federal Reserve appear to have demurred. Policy experts have said officials would find it more difficult to intervene to save First Republic because of restrictions Congress enacted after the 2008 financial crisis.As a result, six weeks of efforts by First Republic and its advisers to sell all or part of its business have not resulted in a viable plan to save the bank — at least thus far.The state of affairs became plain after the close of trading on Monday, when First Republic announced first-quarter results that showed that it had lost $102 billion in customer deposits since early March. Those withdrawals were slightly ameliorated by the coordinated emergency move of 11 large U.S. banks to temporarily deposit $30 billion into First Republic.To plug the hole, First Republic borrowed $92 billion, mostly from the Fed and government-backed lending groups, essentially replacing its deposits with loans. While the move helped keep the bank going, it essentially undermined its business model, replacing relatively cheap deposits with more expensive loans.The bank is paying more in interest to the government on that new debt than it is earning on its long-term investments, which include mortgage loans to its well-heeled customers on the coasts, funding for real estate projects and the like.One of the biggest parts of the bank’s business was offering large home loans with attractive interest rates to affluent people. And unlike other banks that make a lot of mortgages, First Republic kept many of those loans rather than packaging them into mortgage-backed securities and selling them to investors. At the end of December, the bank had nearly $103 billion in home loans on its books, up from $80 billion a year earlier.But most of those loans were made when the mortgage interest rates were much lower than they are today. That means those loans are worth a lot less, and anybody looking to buy First Republic would be taking on those losses.It is not clear what First Republic can realistically do to make itself or its assets more attractive to a buyer.Among the only tangible changes that the bank has committed to is cutting as much as 25 percent of its staff and slashing executive compensation by an unspecified amount. On its earnings call, First Republic’s executives declined to take questions and spoke for just 12 minutes. More

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    First Republic Bank Enters New Free Fall as Concerns Mount

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    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.First Republic Bank’s stock closed down 50 percent Tuesday, a day after a troubling earnings report and a conference call with analysts in which the company’s executives refused questions. The speed of the decline set off a series of volatility-induced trading halts by the New York Stock Exchange.On Monday, after the close of regular stock trading, First Republic released results that showed just how perilous the bank’s future had become since mid-March following the failure of Silicon Valley Bank and Signature Bank. First Republic said its clients pulled $102 billion in deposits in the first quarter — well over half the $176 billion it held at the end of last year.The bank received a temporary $30 billion lifeline last month from the nation’s biggest banks to help shore up its business. Those banks, however, can withdraw their deposits as soon as July. In the first quarter, First Republic also borrowed $92 billion, mostly from the Federal Reserve and government-backed lending groups, essentially replacing its deposits with loans.First Republic is considered the most vulnerable regional bank after the banking crisis in March. What happens to it could also affect investors’ confidence in other regional banks and the financial system more broadly.The bank’s executives did little to establish confidence during its conference call, offering just 12 minutes of prepared remarks. The bank also said on Monday that it would cut as much as a quarter of its work force, and slash executive compensation by an unspecified sum.“This is a trust issue, as it is for any bank, and when trust is lost, money will flee,” Aswath Damodaran, a finance professor at New York University, wrote in an email.An analyst at Wolfe Research, Bill Carcache, laid out what he called “the long list of questions we weren’t allowed to ask” in a research note on Tuesday. Among them: How can the bank survive without raising new money, and how can it continue to provide attentive customer service — a staple of its reputation among wealthy clients — while cutting the very staff who provide it?The bank’s options to save itself absent a government seizure or intervention are limited and challenging. No buyer has emerged for the bank in its entirety. Any bank or investor group interested in taking over the bank would have to take on First Republic’s loan portfolio, which could saddle the buyer with billions of dollars in losses based on the recent interest rate moves. The bank is also difficult to sell off in pieces because its customers use many different services like checking accounts, mortgages and wealth management.There are no easy solutions for First Republic’s situation, said Kathryn Judge, a financial regulation expert at Columbia Law School. “If there were attractive options, they would have pursued them already,” Ms. Judge explained.The Fed can no longer take on some of a bank’s financial risk to ease a takeover in the way it did in 2008, because reforms after the financial crisis changed its powers. And while the Federal Deposit Insurance Corporation might be able to help in some way, that would most likely involve failing the bank and invoking a “systemic risk exception,” which would require sign-off by officials across several agencies, Ms. Judge said.Yet if the bank does fail, the government will have to decide whether to protect its uninsured depositors, which could also be a tough call, she said.“There’s really no easy answer,” Ms. Judge said.Representatives for the Fed and the F.D.I.C. declined to comment.Shares of other banks also fell on Tuesday, though not nearly as much as First Republic. The KBW Bank Index, a proxy for the industry, closed down about 3.5 percent.Separately, the Fed said on Tuesday that its review of the supervision and regulation of Silicon Valley Bank will be released at 11 a.m. on Friday.Rob Copeland More

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    First Republic Bank Lost $102 Billion in Customer Deposits

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    The regional bank received a $30 billion lifeline from big banks last month, but depositors and investors remain worried about its prospects.First Republic Bank, the most imperiled U.S. lender after last month’s banking crisis, on Monday disclosed the grisly details of just how troubled its business has become — and not much else.In the bank’s highly anticipated first update to investors since entering a free-fall over the past month and a half, its leaders said little. In a conference call to discuss its first quarter results with Wall Street analysts, the bank’s executives offered just 12 minutes of prepared remarks and declined to take questions, leaving investors and the public with few answers about how it would escape its crater.“When a bank feels like it has few options remaining, it starts to play by its own rules,” said Timothy Coffey, a bank analyst at Janney Montgomery Scott. “Every day, every week from now until whenever — it’s going to be a fight for them.”One thing is certain: The bank, which caters to a well-heeled clientele on the coasts, seems to be hanging by a thread. During the first quarter, it lost a staggering $102 billion in customer deposits — well over half the $176 billion it held at the end of last year — not including a temporary $30 billion lifeline it received from the nation’s biggest banks last month.Over that same period, it borrowed $92 billion, mostly from the Federal Reserve and government-backed lending groups, essentially replacing its deposits with loans. That’s a perilous course for any bank, which generally do business by taking in relatively inexpensive customer deposits while lending money to home buyers and businesses at much higher interest rates.First Republic is still making some money; it reported a quarterly profit of $269 million, down one-third from a year earlier. It made far fewer loans than it had in earlier quarters, keeping with a general trend in banking, as industry executives worry about a recession and softening home prices and sales.The bank’s stock dropped about 20 percent in extended trading, with the fall worsening after executives declined to take questions from analysts.First Republic’s share price is down more than 85 percent since mid-March.The bank said that its deposit exodus largely ceased by the last week of March. From March 31 to April 21, the bank said that it lost only 1.7 percent of its deposits and that most of those withdrawals were related to tax payments by its clients.The slide began roughly six weeks ago, when the midsize lenders Silicon Valley Bank and Signature Bank were taken over by federal regulators after customers pulled billions of dollars in deposits. First Republic, based in San Francisco, was widely seen as the lender most likely to fall next, because it had many clients in the start-up industry — similar to Silicon Valley Bank — and many of its accounts held more than $250,000, the limit for federal deposit insurance.First Republic has been in talks with financial advisers and government officials to come up with a plan to save itself that could include selling the bank or parts of it, or raising new capital.Much more remains to be done. The bank said on Monday that it would cut as much as a quarter of its work force, and slash executive compensation by an unspecified sum.Until recently, First Republic was a darling of Wall Street. It was founded in 1985 by Jim Herbert, who is still the bank’s executive chairman at 78. The company distinguished itself by offering wealthy clients jumbo mortgages, which can’t be sold to the government-backed mortgage giants Fannie Mae and Freddie Mac. Mr. Herbert consistently touted First Republic’s business model as a sound one because its borrowers had good credit records.In 2007, Merrill Lynch paid $1.8 billion to acquire the bank, but its ownership lasted only three years. Mr. Herbert, with the help of other investors, bought the bank back after the 2008 financial crisis and took it public.Since then, First Republic has focused on expanding by setting up branches in the poshest parts of New York, Boston, San Francisco and Los Angeles and in places synonymous with wealth like Greenwich, Conn., and Palm Beach, Fla. The bank’s branches endeared themselves to clients and prospective customers with personal touches, like warm, freshly baked cookies.Janna Koretz, a 37-year-old psychologist in Boston, started banking with First Republic roughly a decade ago as she was building a group practice. “It’s not like I had all this money,” she said, but her banker was constantly available. The bank would send couriers to her office to pick up cash from her practice.In mid-December, the bank hosted a holiday party at a performing arts space in Manhattan for hundreds of employees and clients, according to two attendees who spoke on the condition of anonymity because they wanted to preserve their relationships with the bank. A graffiti artist wielding black spray paint, and flamenco dancers entertained the crowd. The bank’s chief executive Mike Roffler, who had been in the top job only since March of 2022, warned the crowd that 2023 could be a challenging year for the bank.Three months later, the bank found itself in the spotlight of a different sort. In the days and weeks after Silicon Valley Bank’s demise, numerous larger banks looked into buying First Republic. But a deal didn’t come together and the chief executive of JPMorgan Chase, Jamie Dimon, and the Treasury secretary, Janet L. Yellen, worked together to inject $30 billion in deposits into the bank. The big banks that put in that money can withdraw it in as soon as four months.On the brief conference call on Monday, Mr. Roffler said little about what could happen next and merely reiterated the bank’s public disclosures. “I’d like to take a moment to thank our colleagues for their commitment to First Republic and their uninterrupted service of our clients and communities throughout this challenging period,” he said. “Their dedication is inspiring.” More

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    Auto Sales Withstand Higher Interest Rates, So Far

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    General Motors and several rivals cited robust demand in the first quarter. But affordability is a growing challenge for many buyers.Automakers have mostly overcome the supply-chain challenges that upended production early in the pandemic. Now they are trying to weather a new challenge: higher borrowing costs for their customers.General Motors and several other automakers reported on Monday that new-vehicle sales increased substantially in the first three months of the year, thanks to improved supplies of key components and firm demand from both consumers and commercial customers.But the steady interest rate increases in the last 12 months have raised questions about whether the industry can maintain its sales momentum throughout 2023.Jonathan Smoke, the chief economist at the market research firm Cox Automotive, said higher rates were already starting to put new vehicles out of the reach of buyers with lower incomes or weaker credit scores.According to Cox, “subprime” borrowers — those with weaker credit profiles — make up just under 6 percent of all new-car purchases, down from 18 percent five years ago. Car buyers paid an average interest rate of 8.95 percent last month, up from 5.66 percent in March 2022.The average monthly payment on new vehicles was $784 in February, compared with $681 a year earlier, Cox calculated.“Affordability challenges are limiting access to the vehicle market,” Mr. Smoke said. “Higher interest rates are having a huge impact.”Sticker prices have also challenged buyers. Auto prices — for new and used vehicles alike — have been a prominent driver of inflation over the last two years, although there are signs they are cooling off. The average price for a new car or light truck in February was $48,763, according to Cox — up from $46,297 a year earlier, but down from $49,468 in January.Mr. Smoke said automakers got off to a strong start in January and February, but saw credit tighten somewhat in March after the banking industry was shaken by the collapse of Silicon Valley Bank and Signature Bank.G.M. said its new-vehicle sales in the United States rose 18 percent in the first three months of the year, to 603,208 cars and trucks. Sales to consumers rose 15 percent and sales to rental, corporate and government fleet customers increased 27 percent.In the last several months, G.M. has been able to keep its factories humming as a result of steadier supplies of computer chips and other critical parts. The company ended the quarter with 412,285 vehicles in dealer stocks, up slightly from what it had at the end of 2022, but nearly 140,000 more than it had a year earlier.Honda Motor reported that its U.S. sales increased 7 percent to 284,507 cars and trucks, while Nissan saw a gain of 17 percent, to 235,818. Hyundai said its U.S. sales rose 16 percent to 184,449.Toyota Motor, however, has continued to suffered from parts shortages that have left its dealers with slim inventories. Its first-quarter sales fell 9 percent to 469,558 cars and trucks. Stellantis, formed through the merger of Fiat Chrysler and Peugeot SA, also reported a decline. Its sales fell 9 percent to 368,327 cars and trucks.Ford Motor is scheduled to report its latest sales figures on Tuesday.G.M. has forecast a rapid increase this year in sales of electric vehicles; so far, it is off to an uneven start. The company sold 19,700 Chevrolet Bolt compacts in the first quarter, more than three times the total a year earlier, but other models have yet to make a splash.Sales of the Cadillac Lyriq, an electric sport-utility vehicle, totaled just 968, and G.M. sold only two GMC Hummer E.V.s, down from 99 in the first quarter of 2022.G.M. started production last summer at a new plant in Ohio that is supposed to provide battery packs for the Hummer E.V., the Lyriq and several other vehicles scheduled to arrive in showrooms this year. They include electric versions of the Chevrolet Silverado pickup and the Chevy Equinox and Blazer S.U.V.s. More

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    Why Companies Are Pushing Premium Products With Higher Prices

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    Companies are trying to maintain fat profits as the economy changes, making “premiumization” their new favorite buzzword.Big companies are prodding their customers toward fancier, and often pricier, versions of everything from Krispy Kreme doughnuts to cans of WD-40.It’s evidence of the corporate world’s new favorite buzzword: “premiumization.”Businesses are hoping to keep the good times rolling after several years in which they seized on strong spending by consumers and rapid inflation to raise prices and pump up profit margins. Many firms are embracing offerings that cater to higher-income customers — people who are willing and able to pay more for products and services.One sign of the trend: the notion of premiumization was raised in nearly 60 earnings calls and investor meetings over the past three weeks.It is an indication of a changing economic backdrop. Inflation and consumer spending are expected to moderate this year, which could make it more difficult for firms to sustain large price increases without some justification.The premiumization trend also reflects a divide in the American economy. The top 40 percent of earners are sitting on more than a trillion dollars in extra savings amassed during the early part of the pandemic. Lower-income households, on the other hand, have been burning through their savings, partly as they contend with the higher costs of the food, rent and other necessities that make up a bigger chunk of their spending.“The pool of people willing to spend on small to large premium offers remains strong,” said David Mayer, a senior partner in the brand strategy practice of Lippincott, a consultancy.As products grow more expensive and exclusive, big swaths of the economy are at risk of becoming gentrified, raising the possibility that poorer consumers will be increasingly underserved.Inflation F.A.Q.Card 1 of 5What is inflation? More