A group of financial institutions are in talks to deposit more than $20 billion in First Republic in what’s meant to be a sign of confidence in the banking system, sources told CNBC’s David Faber.
The deal is not done yet, the sources said, and the amounts were a moving target. The plan does not call for an of acquisition of First Republic.
Bank of America, Wells Fargo, and JPMorgan Chase will contribute about $5 billion apiece and Morgan Stanley will deposit around $2.5 billion, the sources said. Truist, PNC, U.S. Bancorp, M&T Bank and Capital One will deposit about $1 billion each.
The news comes after First Republic’s stock has been pummeled in recent days, sparked by the collapse of Silicon Valley Bank last Friday and Signature Bank over the weekend. Both of those banks had a high number of uninsured deposits, as did First Republic, leading to concern that customers would pull their money out.
First Republic’s stock, which closed at $115 per share on March 8, traded below $20 at one point on Thursday. The stock was halted repeated shortly after the news broke and rose to $40 per share at one point, up more than 20% on the day.
The bank had said on Sunday that it had more than $70 billion in availability liquidity, not counting additional funds it could possibly raise from the Federal Reserve’s Bank Term Funding Program, but that was not enough to keep investors from dumping the stock.
The deposits from the larger bank would add to that liquidity if the plan comes to fruition.
In the great financial crisis, several struggling banks were bought for cheap by the larger firms in an effort to help calm the banking system. However, the unrealized losses on First Republic’s bond portfolio due to last year’s rapid rise in interest rates have made an acquisition unappealing, the sources said.
The markdown, which would involve the bank’s held to maturity bond portfolio, would amount to about a $25 billion hole on First Republic’s balance sheet, the sources said.
First Republic typically caters to high end clients and firms, and its business includes wealth management and residential real estate loans. The company reported more than $212 billion assets at the end of December and generated more than $1.6 billion in net income last year.
The bank declined to comment on this story.