Finance  ·  Distress

First Republic Scores $30 Billion Rescue Deal From Lending Rivals

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First Republic Bank scored a $30 billion rescue package from 11 banks in an attempt to stabilize the lender, following the demise of two smaller institutions that shook the financial markets this week.

JPMorgan Chase (JPM), Bank of America (BAC), Citigroup (C) and Wells Fargo (WFC) will contribute $5 billion of uninsured deposits each to First Republic under the plan, with Goldman Sachs (GS) and Morgan Stanley (MS) agreeing to give $2.5 billion each, The New York Times reported. BNY Mellon, PNC Bank, State Street, US Bank and Truist Financial Corporation will hand over another $1 billion each, according to the Times.

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Details of the deal are still being worked out, the Wall Street Journal reported.

The bid to stave off First Republic’s collapse and calm further financial market turmoil comes days after First Republic secured a liquidity lifeline from JPMorgan and the Federal Reserve, giving the lender a total of roughly $70 billion in unused liquidity, Commercial Observer reported. 

“This show of support by a group of large banks is most welcome, and demonstrates the resilience of the banking system,” according to a joint statement from the U.S. Treasury, the Fed and the Comptroller of the Currency.

Earlier this week, commercial real estate lender Signature Bank (SBNY) was taken over by the Federal Deposit Insurance Corporation following the collapse of Silicon Valley Bank (SIVBQ) (SVB), inciting fears that a run on deposits could spread to banks nationwide. 

First Republic was next to face depositors looking to get cash out, thanks in part to its similarities to SVB, in its roster of venture capital and tech clients, CO reported. Like Signature, the bank also held a significant commercial real estate loan portfolio. 

Jim Herbert, executive chairman at First Republic, previously stated that the bank had been able to meet withdrawal demand and that JPMorgan and the Fed’s previous influx of cash stabilized the institution.

Still, many depositors left midsize lenders like First Republic in favor of larger banks to safeguard their cash after SVB collapsed, leading First Republic to consider a sale, Bloomberg reported. The latest deal to aid First Republic could be structured to give back some of the money from First Republic depositors, WSJ reported.

“Regional, midsize and small banks are critical to the health and functioning of our financial system,” JPMorgan, Wells Fargo, Citigroup and Bank of America said in a joint statement. “The actions of America’s largest banks reflect their confidence in the country’s banking system. Together, we are deploying our financial strength and liquidity into the larger system, where it is needed the most.”

Celia Young can be reached at cyoung@commercialobserver.com.