Politics

The FDIC and Wall Street are scrambling to organize the sale of First Republic Bank

ProDentim

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Official offers for the First Republic — which has seen large deposit outflows and suffered massive stock price declines in recent weeks — must be submitted to the FDIC by midday Sunday, the people say. who requested anonymity to provide details of the discussions. .

Federal regulators are hoping to end turmoil in the banking sector following the stunning collapse of Silicon Valley Bank and Signature Bank last month. Much of the problems of the First Republic stemmed from the panic that engulfed these two banks in the midst of a run on deposits.

First Republic, until this year one of America’s most envied bank franchises with more than $200 billion in assets at the end of the first quarter, would be the third-largest bank failure in state history. States after SVB and Washington Mutual. The First Republic released a grim earnings report last week that showed how quickly deposits were soaring, being replaced by more expensive loans, an unsustainable formula that helped trigger the latest stock price crash.

While JPMorgan and PNC Financial expressed interest in a First Republic deal on Thursday, the bidding process officially opened on Friday, which could pave the way for another major bank to also make the bid. winner, said a person familiar with the process.

It also remains possible that the FDIC could decide that the offers it receives are insufficient and that no agreement can emerge. This would mean that the First Republic would reopen on Monday and try to survive at least until regulators accept a subsequent offer.

First Republic, a California-based institution with a solid track record and a highly sought-after clientele, has sunk and bled deposits since SVB and Signature failed. Like those two, First Republic has a large number of customers whose deposits exceed the FDIC-guaranteed limit of $250,000 in their accounts.

When the government rescued SVB and Signature, regulators hoped their decision to guarantee all deposits at the two banks would send a message to depositors that they shouldn’t worry about money in their bank accounts.

It worked to some extent, but it didn’t stop rapid deposit outflows from the First Republic or end a stock price rout that saw the bank’s stock plunge 40% on Friday to close. at just $3.51, a drop of nearly 98% from the same period last year. The consensus among investors is that the First Republic will continue to crumble if it is not rescued by a combined public and private sector deal by the time markets open on Monday.

A group of big banks, including JPMorgan and PNC, tried to shore up the First Republic last month by injecting $30 billion in deposits. It did not work.

JPMorgan, PNC and the FDIC all declined to comment on the talks.

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