A group of financial institutions is negotiating to deposit 30 billion dollars First Republic That should be a sign of confidence in the banking system, sources told CNBC’s David Faber.
A deal has yet to be done, sources said, and the amounts were a moving target. The plan does not require the acquisition of First Republic.
Bank of America, Wells Fargo, Citigroup and JPMorgan Chase will contribute about 5 billion dollars, while Goldman Sachs and Morgan Stanley About 2.5 billion dollars will be deposited, sources said. Believer, PNC, US Bancorp, M&T Bank and The first capital each depositing about $1 billion.
The news comes after First Republic shares tumbled in recent days, fueled by the collapse of Silicon Valley Bank last Friday and Signature Bank over the weekend. Both of these banks had the same number of uninsured deposits as First Republic, which raised concerns that customers would be robbed of their money.
First Republic’s stock, which closed at $115 a share on March 8, traded below $20 at one point on Thursday. Shortly after the news broke, the stock was repeatedly halted and at one point soared to $40 a share, up more than 20% on the day.
The bank said on Sunday it had more than $70 billion in available liquidity, excluding additional funds it may draw from the Federal Reserve’s term-financing program, but that was not enough to keep investors from dumping stocks.
If the plan is implemented, large bank deposits will increase this liquidity.
Several troubled banks were bought cheaply by large firms to help calm the banking system during the Great Financial Crisis. However, unrealized losses in First Republic’s bond portfolio due to the rapid rise in interest rates over the past year have discouraged buying, sources said.
The markdown, which includes the bank’s held-to-maturity bond portfolio, will take about $25 billion off First Republic’s balance sheet, sources said.
First Republic typically serves high-end clients and firms, and its businesses include wealth management and residential real estate loans. The company reported more than $212 billion in assets at the end of December and generated more than $1.6 billion in net income last year.
The bank declined to comment on the story.