PNC, JP Morgan make final bid for First Republic Bank in FTIC auction

NEW YORK, April 30 (Reuters) – PNC Financial Services Group ( PNC.N ), JPMorgan Chase & Co ( JPMN.N ) and Citizens Financial Group Inc ( CFG.N ) are among the banks that have submitted final bids for First Republic Bank. FRC.N) was auctioned by U.S. regulators on Sunday, sources familiar with the matter said.

The Federal Deposit Insurance Corp was expected to announce a deal on Sunday night, while the regulator may say it has taken over the lender, three sources told Reuters earlier.

As the process dragged on late in the evening, a source familiar with the situation said the regulators came back several times with requests to revise the bids and refine specific criteria on the properties to be auctioned.

A decision is nearing, the source said.

U.S. regulators were trying to secure a sale of First Republic over the weekend, with nearly half a dozen banks bidding to make it the third major U.S. bank to fail in two months, sources said on Saturday. Guggenheim Securities is advising the FDIC, two sources familiar with the matter said Saturday.

The FDIC, Guggenheim, FRC and the banks declined to comment.

A contract for First Republic with total assets of $233 billion At the end of the first quarterSilicon Valley Bank and Signature Bank failed to take flight from U.S. lenders within two months, forcing the Federal Reserve to take emergency action to stabilize markets.

Those failures came after crypto-focused Silvergate voluntarily liquidated.

First Republic was the 14th largest lender in the U.S. at the end of last year, bigger than SVB, which was 16th, and Signature, which was 29th. According to central bank data.

Even as markets calm, the deal for the First Republic will be closely watched for the level of support the government will provide.

The FDIC officially insures deposits up to $250,000. But fearing the banks would run further, regulators took the extraordinary step of insuring all deposits at both Silicon Valley Bank and Signature.

to SVP And SignatureThe FDIC created a ‘bridge bank’ to protect depositors.

It remains to be seen whether regulators will do so in the First Republic. They require the approval of the Treasury Secretary, the Chairman, and super-majorities of the Federal Reserve and FDIC boards.

In an effort to find a buyer before closing the bank, the FDIC is turning to some of the largest U.S. lenders. Big banks have been encouraged to bid for FRC’s assets, a source said.

JP Morgan holds more than 10% of the country’s total bank deposits.

Federal law prevents a large bank from acquiring more than 10% of total deposits, but if it buys a failed bank, it can be written off by bank regulators. 1994 Act and interpretation of the document by a source specializing in bank failures.

A shocking fall

First Republic was founded in 1985 by James “Jim” Herbert, the son of a community banker in Ohio. Merrill Lynch bought the bank in 2007, but relisted in 2010 after Merrill’s new owner, Bank of America Corp ( BAC.N ), sold it following the 2008 financial crisis.

Over the years, First Republic has attracted high-net-worth customers with preferential rates on mortgages and loans. This strategy made regional lenders with less affluent customers more vulnerable. The bank had high uninsured deposits which was 68% of deposits.

The San Francisco-based lender saw more than $100 billion in deposits flee in the first quarter, leaving it scrambling to raise cash.

Despite a $30 billion lifeline from 11 Wall Street banks in March, efforts proved futile as buyers balked at the prospect of realizing big losses on its loan book.

A source familiar with the situation told Reuters on Friday that the FDIC had decided that the lender’s condition had deteriorated and there was not much time left to pursue a bailout by the private sector.

On Friday, the First Republic’s market value hit a low of $557 million in November 2021, down from its peak of $40 billion.

Shares of some other regional banks also fell on Friday as it became clear that First Republic was headed for an FDIC receivership, with PacWest Bancorp ( PACW.O ) down 2% and Western Alliance ( WAL.N ) down 0.7% after the bell. .

Reporting by Chris Prentice and Nubur Anand, Writing by Megan Davies; Editing by Paridosh Bansal

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