JPMorgan Chase, Morgan Stanley among banks in rescue talks with First Republic: Report

Some of America's biggest banks like JPMorgan Chase and Morgan Stanley are in talks to rescue First Republic Bank, the Wall Street Journal reported on Thursday. First Republic, the country’s 14th largest bank, plunged into crisis following the collapse of two American banks - Silicon Valley Bank and Signature Bank - and a downgrade by S&P. Shares of First Republic crashed over 62 per cent in the last five days, triggering fears among investors that it may also collapse.

Today, WSJ reported that some biggest lenders in the country were working on a joint rescue deal that could include a sizable capital infusion to shore up the beleaguered bank. JPMorgan is working with Citigroup, Bank of America, and Wells Fargo to provide a lifeline to the First Republic, the report said. Morgan Stanley, Goldman Sachs Group, US Bancorp, and PNC Financial Services Group are involved to work out the deal.

Also read: What is First Republic Bank and why it can collapse

America's banking sector came under pressure after the meltdown of SVB and Signature Banks. The collapse unnerved the investors, who started yanking out billions of deposits from the banks, and the First Republic became another casualty that saw massive withdrawals in the last few days.
   
Earlier in the day, it was reported that First Republic Bank was weighing options to shore up its liquidity and was expected to draw interest from larger rivals.

On Wednesday, Fitch downgraded the San Francisco-headquartered bank to ‘BB’ from 'a-', and placed it on negative watch. The rating agency said that it believes that the bank's funding and liquidity profile has changed and represents a "weakest link" relative to other rating factors. It also said that First Republic’s deposit concentrations were viewed as a rating weakness.

Also read: How does RBI keep India's financial system disciplined, robust?

Fitch said the bank's deposit base was concentrated given the strategic focus on banking wealthy and financially sophisticated customers in select urban coastal markets in the US. "This not only drives a high proportion of uninsured deposits as a percentage of total deposits but also results in deposits that can be less sticky in times of crisis or severe stress," it added.