NEW YORK, April 30 (Reuters) – PNC Financial Services Group ( PNC.N ) and JPMorgan Chase & Co ( JPMN.N ) are set to submit a final bid for First Republic Bank ( FRC.N ) at noon on Sunday. The auction is being conducted by US regulators, sources familiar with the matter said.
Federal Deposit Insurance Corp is expected to announce a deal before Asian markets open on Sunday night, while the regulator may say it has seized the lender, three sources told Reuters earlier.
U.S. regulators were trying to secure a sale of First Republic over the weekend, with nearly half a dozen banks bidding to make it the third major U.S. bank to fail in two months, sources said on Saturday. Guggenheim Securities is advising the FDIC, two sources familiar with the matter said Saturday.
Citizens Financial Group Inc ( CFG.N ) is another competing bidder 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.
The deal for First Republic comes after Silicon Valley Bank and Signature Bank failed in a deposit flight from US lenders less than two months ago, forcing the Federal Reserve to take emergency measures to stabilize markets.
Even as markets calm, the deal for the First Republic will be closely watched for the level of support the government will provide.
The FDIC officially insures deposits up to $250,000. But fearing the banks would run further, regulators took the extraordinary step of insuring all deposits at both Silicon Valley Bank and Signature.
It remains to be seen whether regulators will do so in the First Republic. They require the approval of the Treasury Secretary, the Chairman, and super-majorities of the Federal Reserve and FDIC boards.
In an effort to find a buyer before closing the bank, the FDIC is turning to some of the largest U.S. lenders. Big banks have been encouraged to bid for FRC’s assets, a source said.
A shocking fall
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 relisted in 2010 after Merrill’s new owner, Bank of America Corp ( BAC.N ), sold it following the 2008 financial crisis.
Over the years, First Republic has attracted high-net-worth customers with preferential rates on mortgages and loans. This strategy made regional lenders with less affluent customers more vulnerable. The bank had high uninsured deposits which was 68% of deposits.
The San Francisco-based lender saw more than $100 billion in deposits flee in the first quarter, leaving it scrambling to raise cash.
Despite a $30 billion lifeline from 11 Wall Street banks in March, efforts proved futile as buyers balked at the prospect of realizing big losses on its loan book.
A source familiar with the situation told Reuters on Friday that the FDIC had decided that the lender’s condition had deteriorated and there was not much time left to pursue a bailout by the private sector.
On Friday, the First Republic’s market value hit a low of $557 million in November 2021, down from its peak of $40 billion.
Shares of some other regional banks also fell on Friday as it became clear that First Republic was headed for an FDIC receivership, with PacWest Bancorp ( PACW.O ) down 2% and Western Alliance ( WAL.N ) down 0.7% after the bell. .
Reporting by Chris Prentice and Nubur Anand, Writing by Megan Davies; Editing by Paridosh Bansal
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