Bidders circling in First Republic sale

US regulators racing to clinch sale of First Republic as it looks set to be latest bank to fail amid global crisis for sector

  • JP Morgan and PNC Financial Services Group understood to be in the running 
  • First Republic’s share price has collapsed by 97% this year 
  • It follows demise of SVB, Signature, Silvergate and European giant Credit Suisse 

US regulators were last night racing to clinch a sale of First Republic as it looked set to become the latest bank to fail amid a global crisis for the sector.

JP Morgan and PNC Financial Services Group were understood to be among those left in the running for the San Francisco-based lender, whose share price has collapsed by 97 per cent this year.

It follows the demise of three other US firms – Silicon Valley Bank, Signature and Silvergate – as well as European giant Credit Suisse, which is being taken over by rival UBS.

The crisis blew up in March, jolting stock markets and temporarily freezing the appetite of bond investors to provide funds to banks.

Markets have since calmed but all eyes will be on how they respond to the latest collapse today – and when UK markets reopen tomorrow after the May Bank Holiday.

Casualty: First Republic is expected to be sold imminently

Casualty: First Republic is expected to be sold imminently

First Republic had already been the target of a sharp share price sell-off when the crisis began but was given a stay of execution when Wall Street banks agreed to inject £24billion in deposits.

But that proved to be short-lived as first-quarter results published last week showed that – stripping out that injection – customers pulled out £80billion of funds in the three-month period.

Reports over the weekend suggested that roughly half a dozen banks were bidding for First Republic.

A deal was expected to be finalised in time to be announced by the Federal Deposit Insurance Corporation (FDIC) – an industry-funded scheme – before Asian markets opened.

It will be closely watched for signs of how much support the government will need to provide.

The FDIC officially insures all deposits up to $250,000 (£199,000).

But it the case of SVB and Signature regulators took the exceptional step of guaranteeing all deposits, fearing further damaging bank runs could happen otherwise.

First Republic marketed itself to high-net worth customers with preferential rates on mortgages and loans.

It had a high level of deposits over and above the FDIC threshold – 68 per cent.

The bank’s likely demise was becoming clear by the end of last week though the wider banking sector remained calm at the time.

Unlike SVB, First Republic does not have a UK subsidiary. However, the Bank of England was understood to be monitoring the situation over the weekend.

SVB’s British arm was bought by HSBC for £1 in a deal brokered by the Bank in March.

UK banks have been largely insulated from the crisis – having been forced by regulators to beef up their balance sheets following the financial crisis in 2008.

But the spectacle of billions being drained rapidly from bank deposits – thanks to easy to access online accounts – has made authorities think again about how ready they are to handle a bank run.

Officials have ordered an urgent review of the UK savings guarantee limit, which stands at £85,000.

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