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Breaking News: Major Tech Lender Silicon Valley Bank Fails!
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US Mulls More Support for Banks While Giving First Republic Time
- Changes to Fed’s liquidity program could be made to help bank
- Even without that, officials are letting it continue deal hunt
A First Republic Bank branch in New York.
Photographer: Jeenah Moon/Bloomberg
By
Katanga Johnson and
Saleha Mohsin
March 25, 2023 at 12:32 PM EDT
US authorities are considering expanding an emergency lending facility for banks in ways that would give First Republic Bank more time to shore up its balance sheet, according to people with knowledge of the situation.
Officials have yet to decide on what support they could provide First Republic, if any, and an expansion of the Federal Reserve’s offering is one of several options being weighed at this early stage. Regulators continue to grapple with two other failed lenders — Silicon Valley Bank and Signature Bank — that require more immediate attention.
Even short of that step, watchdogs see First Republic as stable enough to operate without any immediate intervention as the company and its advisers try to work out a deal to shore up its balance sheet, the people said, asking not to be named discussing confidential talks.
First Republic’s stock has plunged more than 90% this month amid concerns that the San Francisco-based lender could fall victim to the same forces that recently caused a trio of US banks to collapse. But while those banks toppled when rapid customer withdrawals forced them to lock in losses on depreciated assets, First Republic has remained open and independent.
Keeping Tabs
US officials have been keeping close tabs on the firm’s health and progress — aiming to stay vigilant in case the situation unexpectedly changes.Behind the scenes, they have concluded the bank’s deposits are stabilizing and that it isn’t susceptible to the kind of sudden, severe run that prompted regulators to seize Silicon Valley Bank within just a few days, the people said.
Though First Republic has structural problems with its balance sheet, it has cash to meet client needs while it explores solutions, the people said. That includes $30 billion deposited by the nation’s largest banks this month.
Representatives for the Fed, FDIC and First Republic declined to comment. The Treasury Department had no immediate comment.
A potential adjustment to the Federal Reserve’s emergency lending program announced on March 13 is among options authorities have weighed in recent days, according to people with knowledge of the deliberations.
Any expansion of the Fed’s liquidity offerings would apply to all eligible users, in keeping with banking law that says remedies must be broadly based, rather than aimed at helping a particular bank. But the change could be made in a way to ensure that First Republic benefits, the people said.
THE INDICATOR FROM PLANET MONEY
The Fed's radical new bank band-aid
April 10, 20235:51 PM ETBy Darian Woods Mary Childs Corey Bridges Kate Concannon
Alex Wong/Getty Images
Given the rough time banks were having last month, the Federal Reserve rolled out a new plan that gives banks a new way to borrow money. It's called the Bank Term Funding Program and while it's a boon for banks, it has costs and risks.
Today, we uncover what makes the Bank Term Funding Program a unique wrench in the Fed's toolkit."></a>
First Republic Bank Expected to be Seized by US Government
First Republic Bank ($FRC) is expected to be seized by the US government, a report by Fox Business Network says.
watcher.guru
First Republic Bank Expected to be Seized by US Government
Michael GrullonApril 25, 2023
Source: The Hill
First Republic Bank ($FRC) is expected to be seized by the US government, a report by Fox Business Network says. According to Fox’s Charles Gasparino, bankers working with First Republic say that they expect eventual government receivership for the ailing bank. This will come after it exhausts private sector solutions such as asset sales and finding a buyer, both of which “appear difficult.”
First Republic lost more than 40 percent of its deposits, approximately $72 billion, in the first quarter of this year. Its shares sank nearly 50 percent as of end-Tuesday. This is according to a Monday announcement by the bank.
The bank has seen record drops over the past month and a half, particularly since the Silicon Valley Bank was closed in March. Multiple big banks have also struggled, however, it looks like First Republic will be falling into the hands of the US government soon.
Fox Business’ Charles Gasparino also adds:
The seizure is not final yet, however, it is very likely to occur according to Gasparino. Shareholders are also suing First Republic as of yesterday. They accuse the bank of concealing how rising interest rates impact business models by prompting an exodus of deposits.
yea that balance sheet was awful and is why the stock plummeted. stock got as low as like 4.75 today.
First Republic Bank to be taken over by FDIC: Report
The FDIC is planning to take ownership over First Republic Bank imminently and says that there's no time for the bank to go after a private sector rescue, according to a report from Reuters.
www.foxbusiness.com
Published April 28, 2023 5:05pm EDT
First Republic Bank to be taken over by FDIC: Report
The FDIC has decided that the bank has no more time to pursue a private sector rescue
First Republic Bank stock crashes as banking fears resurface
Barron's reporter Carleton English discusses First Republic Bank's dramatic stock fall on 'The Claman Countdown.'First Republic Bank will be placed under the receivership of the U.S. Federal Deposit Insurance Corporation imminently, according to a report.
Reuters reported on Friday that the FDIC has decided that the regional bank's position has deteriorated, leaving no more time to go after a private sector rescue, a source told the outlet.
A First Republic Bank branch in New
JPMorgan Chase takes over First Republic after biggest U.S. bank failure since 2008
JPMorgan acquired all of First Republic's deposits and a "substantial majority of assets." Its shares rose 2.6% in premarket trading on the news.
www.cnbc.com
JPMorgan Chase takes over First Republic after biggest U.S. bank failure since 2008
PUBLISHED MON, MAY 1 2023
3:44 AM EDT
UPDATED 55 MIN AGO
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Hugh Son
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KEY POINTS
- JPMorgan acquired all of First Republic’s deposits and a “substantial majority of assets.”
- The acquisition came after regulators took possession of First Republic, resulting in the third failure of an American bank since March.
- First Republic set off a new wave of concern last month with the revelation that it lost more deposits than expected in March.
This illustration photo shows a smart phone screen displaying the logo of First Republic Bank, with a screen showing the logo of JP Morgan Chase in the background in Washington, DC on May 01, 2023.
Olivier Douliery | AFP | Getty Images
Regulators took possession of First Republic on Monday, resulting in the third failure of an American bank since March, after a last-ditch effort to persuade rival lenders to keep the ailing bank afloat failed.
JPMorgan Chase, already the largest U.S. bank by several measures, emerged as winner of the weekend auction for First Republic. It will get all of the ailing bank’s deposits and a “substantial majority of assets,” the New York-based bank said.
The seizure of First Republic resulted in the biggest bank failure since the 2008 financial crisis, when Washington Mutual imploded. Back then, it was also JPMorgan that won the failed banks’ assets.
Since the sudden collapse of Silicon Valley Bank in March, attention has focused on First Republic as the weakest link in the U.S. banking system. Like SVB, which catered to the tech startup community, First Republic was also a California-based specialty lender of sorts. It focused on serving rich coastal Americans, enticing them with low-rate mortgages in exchange for leaving cash at the bank.
But that model unraveled in the wake of the SVB collapse, as First Republic clients withdrew more than $100 billion in deposits, the bank revealed in its earnings report April 24. Institutions with a high proportion of uninsured deposits found themselves vulnerable because customers feared losing savings in a bank run.
Shares of First Republic had lost 97% as of Friday’s close.
Profitable deal
JPMorgan is getting about $92 billion in deposits in the deal, which includes the $30 billion that it and other large banks put into First Republic last month. The bank is taking on $173 billion in loans and $30 billion in securities as well.The Federal Deposit Insurance Corporation agreed to absorb most of the losses on mortgages and commercial loans that JPMorgan is getting, and also provided it with a $50 billion credit line.
The bank is booking a one-time gain of about $2.6 billion and expects to spend about $2 billion on integration costs over the next 18 months.
Furthermore, the acquisition will add over $500 million of profit annually to JPMorgan, excluding the one-time costs. As part of the transaction, JPMorgan said it was making a payment of $10.6 billion to the FDIC.
The bank said that First Republic branches will operate normally Monday, though it plans on retiring the First Republic brand.
Shares of JPMorgan rose 3.3% at midday.
$13 billion hit
The weekend auction, which drew bids from JPMorgan Chase and PNC, as well as interest from other banks, was a “highly competitive bidding process,” according to the FDIC.The transaction will cost the FDIC’s Deposit Insurance Fund an estimated $13 billion, according to the regulator. By way of comparison, the SVB process cost the fund about $20 billion.
The California Department of Financial Protection and Innovation said Monday it had taken possession of First Republic and appointed the FDIC as receiver.
“First Republic Bank’s 84 offices in eight states will reopen as branches of JPMorgan Chase Bank, National Association, today during normal business hours,” the FDIC said in a statement. “All depositors of First Republic Bank will become depositors of JPMorgan Chase Bank, National Association, and will have full access to all of their deposits.”
JPMorgan CEO Jamie Dimon touted the acquisition in a statement early Monday morning.
“Our government invited us and others to step up, and we did,” he said. “This acquisition modestly benefits our company overall, it is accretive to shareholders, it helps further advance our wealth strategy, and it is complementary to our existing franchise.”
In the wake of the takeove, the Treasury Department sought to reassure Americans about the country’s financial system.
“The banking system remains sound and resilient, and Americans should feel confident in the safety of their deposits and the ability of the banking system to fulfill its essential function of providing credit to businesses and families,” a Treasury spokesperson said.
Weak link
First Republic’s deposit drain in the first quarter forced it to borrow heavily from Federal Reserve facilities to maintain operations, which pressured the company’s margins because its cost of funding is far higher now. First Republic accounted for 72% of all borrowing from the Fed’s discount window recently, according to BCA Research chief strategist Doug Peta.On April 24, First Republic CEO Michael Roffler sought to portray an image of stability after the events of March. Deposit outflows have slowed in recent weeks, he said. But the stock tanked after the company disavowed its previous financial guidance and Roffler opted not to take questions after an unusually brief conference call.
The bank’s advisors had hoped to persuade the biggest U.S. banks to help First Republic once again. One version of the plan circulated recently involved asking banks to pay above-market rates for bonds on First Republic’s balance sheet, which would enable it to raise capital from other sources.
But ultimately the banks, which had banded together in March to inject $30 billion of deposits into First Republic, couldn’t agree on the rescue plan, and regulators took action, ending the bank’s 38-year run.
