U.S. banks bid for First Republic Bank

Authorities determined to close the deal before the bank opens doors Monday
U.S. banks bid for First Republic Bank
First Republic Bank

First Republic Bank is back in the headlines after pressure on regional banks in the United States appeared to be winding down.

The latest details of what this bank is going through are that the US authorities have asked several financial institutions to submit offers to buy the assets of First Republic Bank, which has been in trouble since mid-March.

The Financial Times quoted sources as saying that U.S. regulators of the First Republic bailout are negotiating with at least three major banks bidding to buy all or part of the lending bank in California.

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It added that the Federal Deposit Insurance Corporation (FDIC), which is leading the government effort, has received bids from banks, including JPMorgan Chase, PNC, and Citizens.

The Wall Street Journal reported that JPMorgan Chase and PNC have made an offer to buy the bank.

People close to the situation say the government is determined to finalize the sale before the bank opens its doors to business on Monday morning.

First Republic Bank has been under intense pressure since two banks collapsed in early March.

But the bank failed to come up with a satisfactory bailout and its shares, already in poor shape, fell after confirming last week that many of its customers had withdrawn in the first quarter their deposits estimated at more than $100 billion.

The share price of First Republic hit a new low on the New York Stock Exchange on Friday. At the end of Friday’s session, the bank’s share price, which was the fourteenth largest U.S. bank by assets in 2022, fell 43 percent on Wall Street to $3.51 after suspending trading several times during the session due to large volatility.

Thus, the bank is valued at $654 million, down from $20 billion at the beginning of the year and more than $40 billion at its peak in November 2021.

According to several US media outlets, the deposit insurance agency will initially take over the bank’s management, which had assets of $233 billion at the end of March.

The Federal Insurance Agency will then quickly sell part or all of the bank’s assets to another institution.

Gary Cohn, a former Goldman Sachs banker, and adviser to former President Donald Trump, said Sunday morning in an interview with CBS The Nation, “What will likely happen is that the FBI will take control of the assets and then resell the assets to the successful bidder. I think this will happen later this afternoon… before markets in Asia open this evening.”

According to CNBC, if the deal goes that way, it could be announced as early as Monday.

Analysts are questioning whether the insurance institution and the Federal Reserve need to grant a so-called “systemic risk exemption,” as they did with Silicon Valley and Signature Bank last month, enabling the insurer to guarantee all deposits, including those above $250,000.

Eleven major banks, including JPMorgan Chase and BNC, deposited $30 billion with First Republic last month in a failed attempt to stabilize the bank.

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