As U.S. regulators work to finalize the sale of First Republic Bank this weekend, approximately half a dozen banks are actively bidding. Sources indicate that this could be the third major U.S. bank failure within two months. Citizens Financial Group Inc, PNC Financial Services Group, and JPMorgan Chase & Co are among the contenders for First Republic, participating in an auction process overseen by the Federal Deposit Insurance Corp. Bloomberg reports that US Bancorp was also invited by the FDIC to submit a bid.
Two sources familiar with the matter disclosed that Guggenheim Securities is advising the FDIC. The bidding process began this week, with non-binding offers submitted by Friday, according to three sources. Over the weekend, bidders reviewed First Republic's financial information, and one source expects a deal to be announced Sunday night before Asian markets open. At the same time, the regulator is likely to announce the seizure of the lender. Bids are due by Sunday noon, another source added.
Currently, interested banks are assessing their options and determining what they would like to bid for. One source said that it is probable that lenders will bid for all of FRC's deposits, a significant portion of its assets, and some of its liabilities.
Requests for comment from US Bancorp were not immediately answered. First Republic, the FDIC, Guggenheim, and the other banks declined to comment on the matter.
A deal for First Republic comes less than two months after the failures of Silicon Valley Bank and Signature Bank, which led to a deposit flight from U.S. lenders and prompted the Federal Reserve to implement emergency measures to stabilize markets. The First Republic deal will be scrutinized for the level of government support necessary.
While the FDIC officially insures deposits up to $250,000, regulators took the extraordinary step of insuring all deposits at both Silicon Valley Bank and Signature to prevent further bank runs. It remains uncertain whether regulators will need to do the same for First Republic. Approval would be required from the Treasury secretary, the president, and super-majorities of the boards of the Federal Reserve and the FDIC.
In seeking a buyer before closing the bank, the FDIC is engaging some of the largest U.S. lenders. According to one source, large banks were encouraged to bid for FRC's assets.
Eugene Flood, president of A Cappella Partners, who serves as an independent director at First Citizens BancShares and Janus Henderson, said, "For a large bank to buy all or most of the bank could be healthier for First Republic customers because it could put them on a broader and more stable platform."
First Republic, founded in 1985 by James "Jim" Herbert, experienced a stunning fall as more than $100 billion in deposits fled in the first quarter, leaving the bank scrambling to raise funds. Despite an initial $30 billion lifeline from 11 Wall Street banks in March, efforts to rescue the lender were unsuccessful, partly due to buyers' reluctance to realize significant losses on its loan book. By Friday, First Republic's market value had plummeted to $557 million, a far cry from its $40 billion peak in November 2021.
