U.S. banks team up to rescue First Republic Bank with US$30 billion

U.S. financial institutions teamed up on Thursday (16) to rescue First Republic Bank with US$30 billion, they announced in a joint statement.

Bank of America, Citigroup, JPMorgan Chase, and Wells Fargo announced they would each make a US$5 billion uninsured deposit for First Republic Bank.

Goldman Sachs and Morgan Stanley will make an uninsured deposit of US$2.5 billion each, and BNY Mellon, PNC Bank, State Street, Truist, and U.S. Bank will make an uninsured deposit of US$1 billion each, according to the document.

Following the announcement, First Republic shares rose 11.42%, a sharp contrast to the nearly 30% drop earlier in the morning.

According to a note from investment bank Raymond James, First Republic had the third highest uninsured deposit ratio among U.S. banks, behind Silicon Valley Bank (SVB) and Signature Bank.

Fitch Ratings and S&P Global downgraded the San Francisco-based bank to junk on Wednesday.

The move prevents the First Republic from following the path of Silicon Valley Banky and Signature Bank, shut down by authorities on Friday and Sunday, respectively, in a move that set off a wave of panic that spread across Europe.

FIRST REPUBLIC BANK

First Republic Bank is a commercial bank and provider of wealth management services headquartered in San Francisco.

It caters to low-risk, high-net-worth individuals. It operates 93 offices in 11 states, primarily New York, California, Massachusetts, and Florida.

First Republic was founded in 1985 by Jim Herbert and began operations on July 1, 1985, as a California-chartered industrial thrift.

First Republic became a public company via an initial public offering on the NASDAQ in August 1986, selling a stock at US$10 a share. In 1993, First Republic acquired Silver State Thrift, a thrift in Nevada.

In 1998, it acquired Trainer Worthman & Co.; in December 2001, it acquired Starbucks, Tisdale & Associates for US$13 million in cash and stocks.

In January 2000, First Republic acquired an 18 percent interest in Froley, Levy Investment Company Inc., and in 2002, it purchased the investment firm for US$17 million in cash and stock.

In 1996, First Republic sought options to expand product offerings by shifting to a banking charter.

The thrift enlisted a law firm, Lionel, Sawyer, and Collins, to lobby the Nevada Legislature to pass a law allowing the conversion of a Nevada thrift into a Nevada state bank.

The law passed in July 1997, shortly after the First Republic completed a reverse merger of the larger California-chartered thrift into the Nevada-chartered Silver State Thrift subsidiary.

After the law’s passage, the Nevada thrift became a state-chartered First Republic Savings Bank.