JPMorgan Chase advises controversial Bank of the First Republic about strategic alternatives, sources told CNBC’s David Faber.
The alternatives could include a capital increase, the sources said, which could dilute current shareholders. A sale of the bank is also possible.
Shares of First Republic fell 47% in a volatile session, continuing a dramatic decline in March. The stock is now down 90% year to date.
The Wall Street Journal previously reported that JPMorgan and its CEO, Jamie Dimon, were working with others in the industry to fix the bank, whose shares fell 87% this month.
JPMorgan and 10 other banks announced last week that they are collectively depositing $30 billion into First Republic, which has suffered major cash outflows in the wake of the Silicon Valley Bank collapse. The move was designed to bolster confidence in First Republic and the regional banking industry as a whole, but First Republic’s stock has continued to fall.
First Republic announced last week that it had borrowed tens of billions of dollars from the Federal Reserve and Federal Home Loan Banks to help cushion deposit outflows. First Republic had an abnormally high number of uninsured deposits on its books, which was part of the problem with the now-bankrupt Silicon Valley Bank.
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Private banks’ efforts to help First Republic come on the heels of moves by federal regulators to ease pressure on the banking sector. That includes a Bank Term Funding Program that makes it easier for banks to use their high-value assets to raise cash.
A sale of First Republic to a larger bank would be consistent with what happened to some struggling banks during the 2008 financial crisis and with the UBS deal to buy Credit Switzerland during the weekend. However, the potential losses on First Republic’s loans and bonds have limited readiness for such a move, Faber previously reported.
