PNC and JPMorgan make the final bids for First Republic Bank in the FDIC auction

NEW YORK (Reuters) – BNC Financial Services Group (BNCN) and JPMorgan Chase & Co (JPM.N) are among the banks scheduled to submit their final bids for First Republic Bank (FRC.N) by noon. Sunday. Sources familiar with the matter said the auction was being run by US regulators.

Three sources told Reuters earlier that the FDIC was expected to announce a deal Sunday evening before Asian markets opened, and the regulator was likely to say at the same time that it had taken over the bank.

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

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

The FDIC was not immediately available for comment. Guggenheim, French Kennedy and Banks declined to comment.

The First Republic deal will come less than two months after the failure of Silicon Valley and Signature Bank amid a flight of deposits from US lenders, forcing the Federal Reserve to intervene with emergency measures to stabilize the markets.

And while markets have calmed down since then, the First Republic deal will be watched closely to see how much support the government needs to provide.

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

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It remains to be seen if regulators will have to do this at First Republic as well. They would need the approval of the Treasury Secretary, the President, and a supermajority on the boards of directors of the Federal Reserve and the FDIC.

In an effort to find a buyer before the bank closes, the FDIC is turning to some of the largest lenders in the United States. One of the sources said major banks have been encouraged to bid for FRC’s assets.

Stunning fall

First Republic was founded in 1985 by James “Jim” Herbert, the son of an Ohio community banker. Merrill Lynch acquired the bank in 2007, but it was listed on the stock market again in 2010 after it was sold by Merrill’s new owner, Bank of America Corp (BAC.N), in the aftermath of the 2008 financial crisis.

For years, First Republic has attracted high net worth clients with preferential rates on mortgages and loans. This strategy made them more vulnerable than regional lenders with less affluent clients. The bank had a high percentage of uninsured deposits at 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 an initial $30 billion lifeline from 11 Wall Street banks in March, the effort proved fruitless, in part because buyers baulked at the prospect of big losses on their loan book.

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

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By Friday, First Republic’s market capitalization bottomed out at $557 million, down from its peak of $40 billion in November 2021.

Shares of some other regional banks also fell on Friday as it became clear that First Republic was heading into FDIC receivership, with PacWest Bancorp (PACW.O) falling 2% after Bell and Western Alliance (WAL.N) falling 0.7%. .

Additional reporting by Chris Prentice and Nupur Anand, writing by Megan Davies. Editing by Paritosh Bansal

Our standards: Thomson Reuters Trust Principles.

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