PNC, JPMorgan file final bids for First Republic Bank in FDIC auction

NEW YORK, April 30 (Reuters) – PNC Financial Services Group ( PNC.N ) and JPMorgan Chase & Co ( JPM.N ) were among the banks expected to make final bids for First Republic Bank ( FRC.N ) by noon on Sunday in a the auction is run by US regulators, sources familiar with the matter said.

The Federal Deposit Insurance Corp is expected to announce a deal on Sunday evening before Asian markets open, with the regulator likely to say at the same time that it had seized the lender, three sources told Reuters earlier.

U.S. regulators have been trying to broker a sale of First Republic over the weekend, with about half a dozen banks bidding, sources said on Saturday, in what is likely to be the third major U.S. bank failure in two months. Guggenheim Securities is advising the FDIC, two sources familiar with the matter said Saturday.

Citizens Financial Group Inc ( CFG.N ) was another bidder vying for the bank, according to sources familiar with the matter on Saturday.

The FDIC was not immediately available for comment. Guggenheim, the FRC and the banks declined to comment.

A deal for First Republic would come less than two months after Silicon Valley Bank and Signature Bank failed amid a flight of deposits from US lenders, forcing the Federal Reserve to step in with emergency measures to stabilize markets.

While markets have since calmed down, a deal for First Republic will be closely watched for the amount of support the government needs to provide.

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

It remains to be seen whether regulators will have to do the same at First Republic. They would need the approval of the Treasury Secretary, the President, and the supermajorities on the boards of the Federal Reserve and the FDIC.

In an effort to find a buyer before closing the bank, the FDIC is turning to some of the largest US lenders. Major banks had been urged to bid for FRC’s assets, one of the sources said.

FANTASTIC AUTUMN

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 it listed on the stock market again in 2010 after being sold by Merrill’s new owner, Bank of America Corp ( BAC.N ), following the 2008 financial crisis.

For years, First Republic lured high-net-worth clients with preferential mortgages and loans. This strategy made it more vulnerable than regional lenders with less affluent customers. The bank had a high level of uninsured deposits, which accounted for 68% of deposits.

The San Francisco-based lender saw more than $100 billion in deposits flee in the first quarter, making it difficult to raise money.

Despite an initial $30 billion lifeline from 11 Wall Street banks in March, the effort proved futile, in part because buyers balked at the prospect of having to realize big losses on their loan book.

A source familiar with the situation told Reuters on Friday that the FDIC decided that the lender’s position had deteriorated and there was no more time to pursue a rescue through the private sector.

As of Friday, First Republic’s market cap had hit a low of $557 million, down from a peak of $40 billion in November 2021.

Shares in some other regional banks also fell on Friday as it became clear that First Republic was headed for FDIC receivership, with PacWest Bancorp ( PACW.O ) down 2% after the hour and Western Alliance ( WAL.N ) down 0 .7%.

Reporting by Chris Prentice and Nupur Anand, writing by Megan Davies; Editing by Paritosh Bansal

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