- The San-Francisco-based lender lost 97% of its market value prompting the regulators to intervene.
- First Republic recently disclosed losing 40% in deposits due to panic withdrawals.
JPMorgan Chase & Co. and PNC Financial Services Group Inc. are bidding to take over the assets of First Republic Bank from the Federal Deposit Insurance Corporation (FDIC).
According to unnamed sources who shared information with the Wall Street Journal, the FDIC had invited several lenders to submit their bids for the acquisition of the San Francisco-based bank by Sunday. From the received bids, JPM and PNC have reportedly been invited to the next level of the sale.
FDIC was forced to intervene after First Republic’s stock price dropped by up to 97%, leaving the company with slightly over $650 million in market valuation. The bank earlier revealed that it had lost almost 40% of its deposits partly due to panic withdrawals following the collapse of Silicon Valley Bank.
Besides, First Republic’s balance sheet comprises low-interest loans, including an extensive portfolio of jumbo mortgages extended to high-net-worth individuals, which have reportedly lost value since the Federal Reserve’s borrowing rates hikes.
Private Sector Solution
Per the report, as of Friday, the FDIC had yet to decide to place First Republic Bank under receivership after attempts to have a takeover from a consortium of big banks failed to materialize.
The people familiar with the matter revealed to Bloomberg that a group of 11 banks owning up to $30 billion in deposits with First Republic Bank were unable to make a joint investment that could save the bank.
It remains to be seen how competitive JPM’s bid to take over the lender would be, considering the bank has already amassed over 10% of the nationwide deposits, making the firm ineligible per the regulatory requirements. In that case, according to experts, the regulators would have to make an exception.
