Formal bids for First Republic — which has seen massive deposit outflows and suffered a major stock price decline in recent weeks — are due to go to the FDIC by mid-Sunday, according to the people, who spoke on condition of anonymity to provide details of the discussions. .
Federal regulators hope to end the turmoil in the banking industry following the stunning collapse of Silicon Valley Bank and Signature Bank last month. The problems of the First Republic largely stemmed from panic amid the flow of deposits into those two banks.
First Republic, one of the most envied bank owners in the U.S. so far this year with more than $200 billion in assets at the end of the first quarter, would be the third-largest bank failure in U.S. history after SVB and Washington Mutual. First Republic posted a grim earnings report last week that showed how quickly it was churning out deposits, replaced by more expensive loans, helping fuel the recent share price slide.
The bidding process formally opened on Friday, with JPMorgan and PNC Financial expressing interest in the First Republic deal on Thursday, a person familiar with the process said, clearing the way for another big bank to make a successful bid.
The FDIC may decide that the bids they receive are insufficient and no contract can emerge. That means First Republic will reopen for business on Monday and at least try to survive until regulators agree to a subsequent bid.
First Republic, a California-based company with a strong track record and highly desirable client base, has been hemorrhaging deposits since the failure of SVB and Signature. Like those two, First Republic has a large number of customers with deposits in their accounts that exceed the FDIC-guaranteed limit of $250,000.
When the government reinstated SVB and Signature, regulators hoped their decision to withdraw all deposits in both banks would send a message to depositors not to worry about the money in their bank accounts.
That worked to a degree, but didn’t stop the rapid deposit outflow from First Republic or end the stock price rout, which sent the bank’s stock down another 40 percent to just $3.51 on Friday, a nearly 98 percent drop from this time last year. The consensus among investors is that the first republic will continue to be founded by a combined deal from the public and private sector when markets open on Monday.
A group of big banks including JPMorgan and PNC tried to shore up First Republic last month by paying $30 billion in deposits. It didn’t work.
JP Morgan, PNC and the FDIC all declined to comment on the talks.