First Republic Bank in bailout talks with America’s largest lenders

The deal could be unveiled as early as today, people said.

The situation is volatile and whether a deal will materialize and what it might look like is still highly uncertain. Any deal will need regulatory approval and will be driven at least in part by the bank’s highly volatile stock. Shares of First Republic have been under pressure for days, falling another 23% on Thursday amid concerns about the bank’s health in the wake of the Silicon Valley Bank collapse.

First Republic came into the spotlight after the collapse of Silicon Valley Bank last week sparked concerns about other regional banks with large collections of uninsured deposits. Customers pulled billions in deposits from First Republic, and the bank tried to turn the tide this weekend with a deal, announced Sunday, involving additional funding from the Federal Reserve and JPMorgan, giving the bank a total of $70 billion in available liquidity. got.

The bank has maintained that it is stable and that deposit losses are not overwhelming, people familiar with the matter say.

But S&P Global Ratings downgraded the bank’s bonds to junk status on Wednesday and investors continued to sell, adding more uncertainty.

Shares of the bank are down about three-quarters this week. The market cap has fallen from $21 billion on March 8, when the SVB crisis began, to less than $5 billion.

The rapidly changing situation is reminiscent of the drama in the banking system during the 2008 financial crisis, when JPMorgan and its Chief Executive, Jamie Dimon, played the role of white knight and bought Bear Stearns and then Washington Mutual. Lawsuits, losses and political pressure followed. Mr Dimon has said he would never again enter into a government-led bailout.

The banking industry has long envied First Republic’s business and stock valuation. Her clients are wealthy individuals and companies, mainly on the coasts. Lending revolves around providing huge mortgages to clients like Mark Zuckerberg. Few of those loans have ever gone bad. The bank had approximately $213 billion in assets at the end of 2022.

The bank’s profits rose in 2022, but the Fed’s aggressive rate hikes took their toll. No longer were First Republic’s wealthy clients content to leave huge sums of money in bank accounts that paid no interest.

—Laura Cooper, Lauren Thomas, and Rebecca Ballhaus contributed to this article.

Write to David Benoit at David.Benoit@wsj.com and AnnaMaria Andriotis at annamaria.andriotis@wsj.com