First Republic Bank teeters on the edge of the abyss this weekend after customers withdrew around $100 billion of deposits in just a few days and saw its share price crash toward oblivion. The San Francisco-based bank was shaken by similar factors that triggered the collapse of Silicon Valley Bank in March, including the rapid interest rate increases that hurt the value of the bank’s assets and made its funding pricier.
The Wall Street Journal reported that big banks, including J.P. Morgan Chase and PNC Financial Services, were vying to buy First Republic after the expected seizure by the Federal Deposit Insurance Corp (FDIC). On Monday, First Republic released dismal earnings and said the deposit run had drained around $ 100 billion from the bank. Many expect an announcement on Sunday night that FDIC has taken control with plans on selling it or perhaps its assets to larger, more stable banks.
First Republic Bank's shares plunged from $122.50 on March 1 to around $3 a share due to expectations that FDIC would step in by end of day and take control of deposits and assets. Reports from Bloomberg indicated both JPMorgan Chase and Pittsburgh-based PNC Financial are submitting bids for acquiring First Republic through FDIC.
After collapses of SVB and Signature in March, First Republic received a lifeline worth $30 billion in deposits from a collection of large banks such as JPMorgan Chase, Bank of America, Wells Fargo, Citigroup, and Truist (TFC). However, while these cash infusions allowed them temporary respite for six weeks; massive withdrawals disclosed at quarter-end sparked new concerns about long-term viability.
Federal regulators aim to seize control over embattled regional bank - partaking efforts initiated last month following Silicon Valley Bank's failure - either via asset sales or private firm acquisition if no deal is reached with private entities during bidding process opened up Friday.
Banking sector turmoil led to a 75% drop in First Republic Bank's stock, and top U.S. officials insist the American banking system remains safe and resilient due to coordinated action taken by regulators last month.
FDIC is preparing to announce formal bids for First Republic Bank, which has seen heavy deposit outflows and massive share price declines recently. The bank would be the third-largest bank failure in U.S. history after SVB and Signature if not rescued by combined public-private deals before Monday's market opening. JPMorgan Chase and PNC Financial expressed interest on Thursday; however, FDIC might opt against any deal if bid values are deemed insufficient.