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First republic talks extended into night after banks bid – East Bay Times

Hannah Levitt, Katanga Johnson, Jillian Tan, Katherine Dougherty

(Bloomberg): U.S. regulators resolved First Republic Bank crisis late Sunday after the noon deadline for submitting final bids to buy the embattled bank passed I worked late into the night to

The Federal Deposit Insurance Corporation had asked banks including JPMorgan Chase & Co., PNC Financial Services Group Inc. and Citizens Financial Group Inc. to submit proposals, according to people familiar with the matter. Bank of America and U.S. Bancorp were also invited but withdrew bids, according to people familiar with the confidential talks, who asked not to be identified.

The regulator is asking at least some of the bidders follow-up questions as it compares bank proposals. If no deal is reached, the regulator has the option to seize First Republic and take ownership of the bank.

Spokespeople for JPMorgan, PNC, Citizens Financial, US Bancorp, Bank of America and the FDIC declined to comment.

After weeks of fruitless talks between the banks and their advisers, the bidding process initiated by the regulator is ahead of the auction, which was postponed following last month’s failed Silicon Valley and undersigned banks. could pave the way for a more orderly sale of First Republic. .

It’s unclear to some of those involved in the process whether regulators will bid on a so-called open bank solution that would avoid formally declaring the First Republic a failure and seizing it.

The drop in the stock price pushed the company’s market capitalization to $650 million, but made such an acquisition at least somewhat more viable.

jumbo mortgage

But financials aren’t the only hurdles to trading.

JP Morgan is one of the few giant banks that has already amassed more than 10% of the nation’s deposits, making it ineligible under U.S. regulations to acquire another depository institution. Authorities should make an exception to allow the country’s largest bank to grow even bigger.

As of Friday night, the FDIC had not yet reached a decision to bring First Republic under its control, people with direct knowledge of the matter said. A representative for the California banking regulator, which takes the lead in declaring whether the San Francisco-based bank has failed, did not respond to a request for comment.

Placing pressure on First Republic’s balance sheet is a mountain of low-interest loans, including an unusually large portfolio of large mortgages for the wealthy. Such debt loses value in rising interest rates and the company faces a loss if forced to sell.

During last month’s regional banking crisis, wealthy customers and businesses withdrew cash from banks with such flaws in their balance sheets. and provided a way for banks to borrow a portion of their holdings to meet their cash needs.

waiting for help

The 11 banking groups that pledged $30 billion to First Republic in March have given them time to find private sector solutions, but their reluctance to band together to make joint investments has proved reluctant. It turns out. Several proposals that surfaced recently required a consortium of stronger banks to purchase assets from First Republic at above-market prices. However, no agreement was reached.

Instead, some stronger companies are waiting for the government to provide support or bring the banks under control. This is what they see as a cleaner solution and may sell the bank or parts of it at an attractive price.

But the FDIC could cost its own deposit insurance fund billions of dollars, an outcome receivers want to avoid. The agency is already planning to impose a special rating on the industry to cover the cost of his SVB and Signature Bank failures last month.

–With help from Lydia Beyoud and Max Reyes.

(Adds regulatory question in third paragraph.)

Other stories like this bloomberg.com

©2023 Bloomberg LP

https://www.eastbaytimes.com/2023/04/30/first-republic-talks-extend-into-night-after-banks-place-bids/ First republic talks extended into night after banks bid – East Bay Times

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