THE BASIS POINT

First Republic for sale, maybe. Won’t be first time. Or big banks step in to help.

 
 

Bloomberg reported March 15 about First Republic for sale, maybe. Here’s what they said, and below that are 2 other updates: (1) a WSJ briefing on big banks maybe helping First Republic, and (2) a quick rundown of the last time First Republic sold, then became independent again.

First Republic Bank, the San Francisco-based lender that was cut to junk by S&P Global Ratings and Fitch Ratings on Wednesday, is exploring strategic options including a sale, according to people with knowledge of the matter.

The bank, which is also weighing options for shoring up liquidity, is expected to draw interest from larger rivals.

Here’s WSJ on a possible big bank lifeline for First Republic:

The biggest banks in the U.S. are discussing a joint rescue of First Republic Bank totaling more than $25 billion. JPMorgan Chase & Co., Citigroup Inc., Bank of America Corp. and Wells Fargo & Co. are in talks to deposit $5 billion of their own money each into First Republic. Morgan Stanley and Goldman Sachs Group Inc., as well as regional banks U.S. Bancorp, PNC Financial Services Group Inc., and Truist Financial Corp. would all kick in smaller amounts.

The details are still being worked out, and the banks have discussed the plan with officials and regulators in Washington, D.C., the people said. A deal could be unveiled as early as today.

Big banks received an influx of billions of deposits from midsize lenders including First Republic over the past week in the wake of the collapse of Silicon Valley Bank. The deal could be structured in such a way that the banks are effectively giving back some of the money they have raked in from panicky First Republic depositors.

The rescue would be an extraordinary effort to protect the entire banking system from widespread panic by turning First Republic into a firewall.

In the link below from Monday, I detailed 4 ways First Republic looks strong and maybe could weather the storm.

That post is still worth reading for details major media aren’t covering.

It seems JP Morgan Chase could be a buyer since they provided a lifeline to First Republic already.

But that’s speculation, and I still hope First Republic can go it alone.

That’s their spirit. They’ve sold before, only to return to independence.

That independence led to their leadership on high-touch banking for sophisticated consumers, and both small and large businesses.

They sold to Merrill Lynch for $1.8 billion in January 2007 and closed in September 2007 as the last financial crisis was heating up.

As the crisis peaked in September 2008, Merrill Lynch was sold to Bank of America for $50 billion.

In October 2009, First Republic management bought itself out from Bank of America for about $1 billion.

That private deal closed July 2010, and First Republic’s second IPO was December 2010 at $280.5 million, with shares opening at $27.25.

The chart above shows pre-market trading at $20.40, which puts First Republic back below square one of IPO two.

Again, First Republic has demonstrated an independent spirit as it navigates market chaos.

So we’ll see if this record holds now or later.

Please reach out with questions, comments, intel about a First Republic sale or big bank backstop.

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Reference:

First Republic Bank Is Said to Weigh Options Including a Sale (Bloomberg)

JPMorgan, Morgan Stanley and Others in Talks to Bolster First Republic Bank (WSJ)

Will there be a First Republic Bank run? Here are risk factors and strengths. (The Basis Point)

 

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