After the collapse and bail out of Silicon Valley Bank and Signature Bank, the U.S. banking market is not settling. U.S. regulators have requested that banks submit their best takeover offers for First Republic by Sunday afternoon. The U.S. Federal Deposit Insurance Corporation has reportedly asked six banks to bid for the embattled lender. Shares in First Republic plunged from $122.50 on March 1 to around $3 a share last Friday.
The seizure and sale of First Republic mark the collapse of a lender that was, until recently, the envy of finance. With some $233 billion in assets at the end of the first quarter, it would be the second-largest bank to fail in U.S. history.
Sources familiar with the matter suggest that JP Morgan and PNC are the most likely bidders for the troubled lender, which would be taken over in receivership and immediately sold to the winning bank. The Wall Street Journal reported that these banks are interested in First Republic. According to sources, other companies, including Bank of America, are also considering bids for the lender. If regulators receive a suitable offer by Sunday, a new owner for First Republic could be announced early Monday.
The auction for First Republic marks the end of a difficult period for mid-sized U.S. banks. Following the collapse of Silicon Valley Bank (SVB) and Signature Bank in March, attention turned to First Republic as the weakest link in the American banking system. Like SVB, First Republic is a California-based specialty lender that focuses on serving affluent clients, offering low-rate mortgages in exchange for deposits. Following the SVB collapse, First Republic clients withdrew over $100 billion in deposits, as disclosed. Depositors had withdrawn about 41% of their money from the bank during the Q1 2023.
