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First Republic Bank Auction: Half a Dozen Banks Bidding

U.S. regulators aim to finalize the sale of the struggling First Republic Bank this weekend, with major banks bidding in an FDIC-run auction.

First Repuclic Bank
First Repuclic Bank

U.S. regulators are working to finalize the sale of First Republic Bank (NYSE: FRC) this weekend, with around six banks placing bids. This marks the third major U.S. bank failure in two months. Citizens Financial (NYSE: CFG) Group Inc, PNC Financial Services Group (NYSE: PNC), and JPMorgan Chase & Co (NYSE: JPM) are among those competing in the Federal Deposit Insurance Corp (FDIC)-run auction.

Major Bidders and FDIC's Role in the Process

US Bancorp (NYSE: USB) has also been invited to bid by the FDIC, according to Bloomberg. Guggenheim Securities is advising the FDIC throughout the process. Bidders were asked to submit non-binding offers by Friday and have been reviewing First Republic's financial information over the weekend.

Deal Announcement and Bid Evaluation

A deal is expected to be announced Sunday night before Asian markets open. Regulators are likely to seize the lender at the same time. The interested banks are currently considering their options for what they would like to bid on, with lenders expected to bid for all of FRC's deposits, a significant portion of its assets, and some of its liabilities.

Difficult Deal in Banking Sector

The potential First Republic deal follows the recent failures of Silicon Valley Bank and Signature Bank (OTC: SBNY). The Federal Reserve was forced to intervene with emergency measures to stabilize markets. A deal for the First Republic will be closely watched to gauge the extent of government support needed.

FDIC logo
FDIC logo

FDIC's Exceptional Measures and Large Bank Involvement

The FDIC has been encouraging large banks to bid for FRC's assets. It is currently unclear whether regulators will need to insure all deposits at First Republic, as they did with Silicon Valley Bank and Signature. A large bank acquiring most or all of the banks could provide a more stable platform for First Republic customers.

First Republic's Fall from Grace

Founded in 1985, First Republic experienced a significant loss of deposits in the first quarter, leaving it struggling to raise money. Despite an initial $30 billion lifeline from 11 Wall Street banks in March, efforts to rescue the bank failed. The FDIC determined there was no more time to pursue a private-sector solution, with First Republic's market value plummeting to a low of $557 million from its peak of $40 billion in November 2021.