Among the banks that filed final offers for First Republic Bank (FRC.N) yesterday in an official auction by US regulators were as follows: PNC Financial Services Group (PNC.N), Citizens Financial Group Inc (CFG.N), and JPMorgan Chase & Co (JPM.N), sources revealed.
According to three individuals, the Fed Deposit Insurance Corp. was anticipated to announce an agreement on Sunday night while also announcing that it had seized the lender.
One of the source said the authorities had repeatedly requested that bids be amended and that specific criteria on properties that were being bid upon be adjusted as the process ran on well into the evening.
A sense that a choice was about to be made, according to that source.
Approximately half a dozen banks are reportedly bidding for First Republic, according to sources on Saturday.
If successful, this would make First Republic the third sizable U.S. bank to tank in the past two months.
Guggenheim Securities is counselling the FDIC, according to two people with knowledge of the situation on Saturday.
The banks, FDIC, Guggenheim, alongside FRC all declined to comment.
A deal for First Republic would be reached less than a couple months after Silicon Valley Bank & Signature Bank failed due to a deposit flight from American lenders, forcing the Federal Reserve to take emergency measures to stabilise the markets.
At the close of the first quarter, First Republic had held onto total assets of $233 billion.
Those failures followed the voluntary liquidation of cryptocurrency-focused Silvergate.
Fed data showed the First Republic was the 14th largest lender in the United States at the end of last year, surpassing SVB, which was rated 16th, and Signature, which had ranked 29th.
Despite the fact that markets have since stabilised, a deal for First Republic will be closely scrutinised to determine how much support the government might need to offer.
Officially, deposits up to $250,000 are insured by the FDIC.
Regulators, however, made the extraordinary decision to insure all deposits at Silicon Valley Bank & Signature because they feared additional bank runs.
To safeguard depositors, the FDIC established a intermediary bank for SVB and Signature.
It is uncertain whether regulators would also need to take such action at First Republic.
Treasury Secretary, the President, along with supermajorities of the Federal Reserve and/or FDIC boards would all need to approve them.
The FDIC is looking to some of the biggest U.S. lenders to find a purchaser before liquidating the bank.
One of the individuals claimed that big banks had been urged to compete for the assets of FRC.
More than 10% of all bank deposits in the nation are held by JPMorgan.
The 1994 statute said that a major bank is prohibited by federal law from making a purchase that would push it above an upper limit of 10% of total deposits, but that may be exempted by banking regulators if it was purchasing a failed bank.
The son of a local banker in Ohio, named James “Jim” Herbert started First Republic in 1985. The bank was purchased by Merrill Lynch in 2007, however after the 2008 financial crisis, Merrill’s nwely-appointed owner, Bank of America Corp (BAC.N), had sold it, the bank was once more listed on the stock market in 2010.
For many years, First Republic used special mortgage and loan rates to entice high net worth clients.
Due to this strategy, it was more exposed than local lenders who served less wealthy clients. The percentage of uninsured deposits at the bank was high, at 68%.
The San Francisco-based lender struggled to raise more money than $100 billion in only deposits fled during the first quarter.
