The Federal Deposit Insurance Corporation (FDIC) has approached major banks, including JPMorgan Chase & Co. and PNC Financial Services Group Inc., to submit final bids for the acquisition of First Republic Bank by Sunday. This comes after gauging initial interest earlier in the week, potentially leading to a smoother sale compared to the protracted auctions that followed last month's failures of Silicon Valley Bank and Signature Bank.
Uncertainty remains among those involved in the process as they are unsure whether regulators might utilize a bid for an open-market solution that refrains from formally declaring First Republic a failure and seizing it. However, financial hurdles aren't the only obstacle in executing such deals. The FDIC is already considering imposing a special assessment on the industry to cover last month's bank failures' costs, which may result in a multibillion-dollar hit to its own deposit insurance fund.
As per sources close to the matter, JPMorgan Chase has emerged as one of the top bidders for First Republic Bank amid plans by FDIC officials who are preparing for its seizure - marking this as their third lender failure since March 2021.
First Republic Bank has maintained profitability every year since its establishment in 1985 and boasts an attractive wealth management business alongside tens of billions of dollars worth unrecognized losses incurred due to securities and loans on its balance sheet.
Despite these challenges, potential owners find First Republic appealing because central banks have raised benchmark lending rates by around five percentage points over just 14 months while generating returns near three percent through government securities investments exceeding $100 billion in residential mortgages.
In discussing possible outcomes with people knowledgeable about this situation: "U.S. regulators have requested best-possible takeover offers from banks interested in acquiring Manhattan-based branch First Republic." They added that if seized under receivership terms, the bank would be immediately sold to the winning bidder. JPMorgan Chase and PNC have surfaced as likely contenders, but other companies are also expected to express their interest in this unfolding news story.