Reducing Asset-Liability Mismatch
The potential sales aim to decrease the bank's asset-liability mismatch, with possible buyers including major U.S. banks. These buyers might receive warrants or preferred equity as an incentive to purchase assets above their market value.
Strengthening Financial Position and Avoiding FDIC Seizure
First Republic Bank is working to strengthen its financial position to avoid being taken over by the Federal Deposit Insurance Corp (FDIC). The bank may also be preparing for a capital raise.
U.S. Government Involvement in Stabilizing Lender
Sources suggest that the U.S. government might need to enable negotiations with some of the country's largest banks to stabilize the First Republic as it works on its turnaround.
Share Decline and Strategic Options
First Republic shares experienced a 40% decline on Tuesday after reporting a larger-than-expected deposit decrease for the first quarter. The bank also announced it is exploring strategic options to improve its position.