First Republic and Other Banks Seek to Attract Buyers

For smaller banks, any deal would bring the possibility of expanding regional footprint or moving into a new one. Acquiring Silicon Valley Bank could be a path into the venture capital industry, while Signature has a strong presence in New York.

First Republic boasts a franchise on both coasts, and yet the most elaborate efforts of its peers and the government have yet to stabilize it.

On Thursday, JPMorgan Chase, Bank of America, Wells Fargo and Citigroup, along with seven other prominent banks, said that they would inject $30 billion into the beleaguered lender to stave off financial ruin. That $30 billion amount was effectively a gigantic deposit, much like how everyday customers and businesses park their money in a bank, meant to help First Republic meet short-term obligations, though the larger banks may pull out their money in as little as four months, and they will be paid interest in the meantime.

Shares rallied on Thursday after the bailout announcement, but by Friday morning, the lender’s stock plummeted again. That set off renewed efforts, the people with knowledge of the process said, to find a new backstop to keep the bank from collapsing. The share sale under discussion, which still may change, is effectively a way for First Republic to gather funds that it won’t have to repay — though in exchange, it would be handing over ownership of part of its business to an outsider.

Many analysts said that investors might see First Republic’s rescue as a short-term fix. Analysts at UBS said on Friday that banking stocks would “truly settle only after the market feels as if there is a longer-term solution” to First Republic’s woes.

First Republic had already been exploring options to save itself. Before the lifeline announced on Thursday, it was working with advisers on a possible sale to a larger rival or a rescue that could include a quick injection of cash to ensure that it had enough to pay out customer withdrawals going forward. The lender had also tried to shore up its finances last weekend with up to $70 billion in emergency loans from the Federal Reserve and JPMorgan.

Article source: https://www.nytimes.com/2023/03/17/business/first-republic-stake-sale.html