Global Courant 2023-04-29 23:29:38
A First Republic bank branch in Manhattan on April 24, 2023 in New York City.
Spencer Plat | Getty Images
US regulators have asked banks about their best and latest takeover bids for First Republic by Sunday afternoon, in a move authorities hope will calm markets and end a period of uncertainty for regional lenders.
JPMorgan Chase And PNC are likely bidders for the ailing lender, who people in the know said would be seized and immediately sold to the winning bank. The Wall Street Journal reported interest from those banks late Friday.
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Other companies will probably go a step further. bank of America is one of several institutions considering a possible bid for First Republic, according to those in the know.
As regulators led by the Federal Deposit Insurance Corp. received an acceptable offer on Sunday, a new owner for First Republic may be announced Monday morning. That scenario would cause the least amount of disruption for First Republic customers, who would start the week knowing their bank is now owned by a financially stable operator.
The First Republic auction could end a tumultuous period for medium-sized US banks. Since the bankruptcy of Silicon Valley Bank in March, attention has shifted to First Republic as the weakest link in the US banking system. Shares of the bank fell 90% last month and then plunged further this week after First Republic announced the dire situation.
Like SVB, which caters to the tech startup community, First Republic is also a California-based specialty lender. It focused on serving wealthy Americans on the coast, enticing them with low-interest mortgages in exchange for leaving cash at the bank. That model unraveled in the wake of the SVB’s collapse, as First Republic clients withdrew more than $100 billion in deposits, the bank announced Monday.
As First Republic’s situation worsened, regulators initially cast a wide net, asking a large group of banks what they thought the company was worth, a person with knowledge of the process said. That group has shrunk in recent days, with the idea that regulators would only share information needed to make a final bid with the most serious contenders.
The acquisition makes the most sense for institutions looking to grow in the affluent coast; First Republic’s offices are concentrated in California, New York, Boston and Florida.
The likely bidders are all represented in the group of 11 banks that teamed up last month to inject $30 billion in deposits into First Republic. That move helped stem the larger outflow of deposits from medium-sized banks to top-four institutions, including JPMorgan and Wells Fargo, giving regulators breathing space to sort out First Republic, CNBC reported last month.
But not every major bank that participated in the deposit injection will make a bid. Wells Fargo, Goldman Sachs And Citi group according to people with knowledge of the banks, not all will make an offer.
Wells Fargo is still operating under a 2018 asset ceiling imposed by the Federal Reserve. Goldman has made a strategic decision to move away from retail financing and is selling consumer loans. Citigroup has unburdened business units to simplify operations while improving risk controls.
This is the latest news. Check back later for updates.
