Republic Bank first for possible sale after institutional bailout

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Many institutions involved in bailout of distressed people First Republic Bank They are also said to be looking into a possible purchase of the San-Francisco-based institution, Fox Business has learned.

Those interested include Morgan Stanley and PNC Bank – among many of the companies that have put in $30 billion in bailout money to save First Republic from bankruptcy including Silicon Valley Bank (SVB), Signature Bank and Silvergate. Direct knowledge of the matter.

First Republic gets $30 billion in relief from biggest US banks

Spokesmen for Morgan Stanley and PNC declined to comment. There was no immediate comment from First Republic press officers.

These people say it is uncertain if a deal will happen. It is also unclear whether any deal would pass regulatory scrutiny from the Biden administration, where antitrust officials have been wary of large mergers.

A file photo showing the logo of Morgan Stanley is seen in New York on January 9, 2013. Reuters / Shannon Stapleton

Banking regulators have expressed concern over the country’s biggest banks getting bigger. The country’s top 10 banks control the majority of assets and customer deposits in the financial system.

But people with knowledge of regulators’ thinking say they are also growing concerned about the stability of mid-tier banks like First Republic after the triple implosion of other similarly sized institutions Silvergate, Signature and SVB.

First Republic Bank executives sold $12 million in stock in the months before the crash

Banking regulators believe that medium-sized banks have the least diversified asset bases and are most susceptible to losses associated with a high interest rate environment. They are also vulnerable to bank runs or depositors withdrawing money from accounts at the first stroke of trouble, according to the experience of SVB, Signature and most recently First Republic.

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First Republic Bank Branch

Close-up of the sign with the logo on the façade at a First Republic Bank branch on March 16, 2023 in San Ramon, California. (Photo by The Smith Collection / Gado / Getty Images)

People with knowledge of the matter say that banking regulators are increasingly comparing the current state of the banking system to the savings and loan crisis of the late 1980s, when so-called austerity that was heavily invested in risky assets collapsed on a large scale. Went.

Because of growing fears of this systemic risk, some on Wall Street believe Biden could get banking regulators to approve a merger between a large bank and First Republic, which has $200 billion in assets. By comparison, Morgan Stanley has approximately $1.2 trillion in assets.

“In this uncertain environment, the bigger players with solid funding will be the buyers and the weakest players will be bought,” said Chris Whelan, chairman of Whelan Advisors in New York. First Republic is an attractive acquisition for a large advisory firm and regulators. Might as well accept it.”

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Sources with knowledge of the potential buyout say a deal could come within days, but it is not guaranteed, and the situation is fluid so it is possible First Republic could remain independent. It is unclear whether First Republic is actively looking for a buyer or if larger banks have already approached its management.

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JPMorgan, Morgan Stanley, PNC and others have privately analyzed First Republic’s deposit base and loan in preparation for a potential bid, sources with knowledge of the matter say.

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First Republic Bank in New York

First Republic Bank branch in New York, US on Friday, March 10, 2023. Shares of First Republic Bank were halted after plunging up to 53% on Friday, the most intraday losses on record, as bank shares tumbled. From SVB Financial Group. Photographer: Jinnah Moon/Bloomberg via Getty Images

Fox Business was the first to report that banks were preparing to provide financing to First Republic to build what What has been described as a “liquidity crisis”. First Republic was profitable last year, but its business has been under pressure from Fed rate hikes in 2023.

This pressure has become more acute after the collapse of the SVB. First Republic suffered mass withdrawals, its bonds were recently downgraded to junk status and its stock has fallen more than 70% in the past week.

Fear of collapse prompted the country’s 11 largest banks to develop a rescue plan, where each of them committed to putting $30 billion worth of deposits into the bank. Fox Business first reported the bailout talks on Clammon Countdown on Wednesday. News of the bailout caused First Republic’s stock to jump nearly 10 percent on Thursday.

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But the bailout may not be the last word on the bank’s future. Officials who worked on the deal say that discussions about a possible purchase of First Republic took place among the same institutions that were putting up the money.

A CEO directly involved in the bailout said, “Everyone is looking to buy First Republic.” “It is a great bank suffering from a liquidity crisis.”

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