Federal regulators are preparing to seize First Republic Bank as early as this weekend, while major banks, including JPMorgan Chase and PNC, are vying to buy the lender once it goes into receivership, according to multiple reports.
If the San Francisco-based lender goes into receivership, it would be the third US bank to collapse since March, in addition to UBS’s takeover of European giant Credit Suisse, brokered by the Swiss government.
After failing to find a private buyer for First Republic this week, the U.S. Federal Deposit Insurance Corporation decided the bank’s position had deteriorated to the point that the time was up for a private sector bailout. sources told Reuters.
The FDIC, after gauging initial interest earlier this week, has asked major banks, including JPMorgan and PNC, to submit their final offers to buy First Republic in receivership by Sunday, according to Bloomberg News.
It suggests the regulator could be planning quick action to seize the First Republic and then transfer control to a private buyer before the bank reopens on Monday morning.
Federal regulators are preparing to seize First Republic Bank as early as this weekend. JPMorgan Chase and PNC are said to be in the running to buy the lender once it goes into receivership
First Republic shares fell 75% Monday-Friday after the bank revealed it lost $100 billion in deposits in the first quarter
The FDIC contacted the banks late Thursday for indications of interest, including a proposed price and an estimated cost for the agency’s deposit insurance fund, according to the Bloomberg report.
The FDIC said in a statement, “We do not comment on or confirm information about open and operating banks.”
Spokespersons for First Republic, JPMorgan Chase and PNC declined to comment when contacted by DailyMail.com on Saturday morning.
On Friday, a First Republic spokesman said: ‘We are engaged in discussions with multiple parties about our strategic options while continuing to serve our customers.
For suitors, buying First Republic after its FDIC receivership is potentially more attractive than buying on the open market for a number of reasons, including dramatic reductions in bureaucracy and potential liabilities.
First Republic held some $233 billion in assets at the end of the first quarter, meaning that if it went into receivership, it would become the second largest bank to fail in US history, eclipsing the Silicon Valley Bank collapse on March 10.
The collapse of Silicon Valley Bank and, a few days later, Signature Bank of New York, sparked a run on deposits at First Republic, which is the U.S. lender with the largest share of uninsured deposits in the world. above the FDIC limit of $250,000.
A $30 billion lifeline from a consortium of 11 major US banks, which injected the funds as deposits into the First Republic on March 16, failed to bolster confidence in the lender.
These deposits are uninsured and it is unclear what will happen to them if the FDIC places the First Republic in receivership.
First Republic said earlier this week that its filings fell more than $100 billion in the first quarter. The bank’s CEO, Michael J. Roffler, is seen above
For suitors, buying First Republic after its FDIC receivership is potentially more attractive than buying on the open market for a number of reasons.
Despite the lifeline, First Republic has struggled to find support from major banks or private equity firms on its plan to create a so-called “bad bank” to divest troubled assets.
On Monday, First Republic disclosed that it lost about $100 billion in deposits during the first quarter, triggering a strong selloff in the company’s stock.
First Republic shares fell 75% Monday-Friday and are now down more than 97% year-to-date, when they traded around $120.
At its lowest point on Friday, the bank had a market capitalization of nearly $557 million, a far cry from its peak valuation of more than $40 billion in November 2021.
The shares, which last traded at $2.33 in extended hours on Friday, would be essentially worthless if the company were seized by the FDIC.
However, unlike events surrounding the collapse of SVB and Signature last month, worries surrounding the First Republic had little impact on broader markets or other banking stocks this week.
The Dow Jones Industrial Average rose on the week to end its best month since January as investors appeared to view the problems of the First Republic as isolated.
John Guarnera, senior analyst at RBC Bluebay Asset Management, told Reuters the First Republic case was an “evolving situation”.
“The rest of the regional banking system feels like it’s in a different place than where [First Republic] is, he said.
News of the impending decision to put the First Republic into receivership followed reports from the Federal Reserve and FDIC detailing their oversight shortcomings before the deposits caused the collapse of Silicon Valley Bank and Signature. Bank in March.
The Fed’s assessment of its shortcomings in identifying problems and seeking fixes at California-based SVB came with promises of tougher oversight and tougher rules for banks.
Origin: | This article originally belongs to Dailymail.co.uk