First Republic spoke to private equity before securing funding sources

NEW YORK, March 15 (Reuters) – First Republic Bank ( FRC.N ) talked to at least one private equity firm about raising capital before securing financing from JPMorgan Chase & Co ( JPM.N ) and U.S. authorities intervened with support for industry, said two sources familiar with the matter.

The conversations, which have not previously been reported, shed new light on the frenzy of activity that took place over the weekend following the collapse of Silicon Valley Bank, as other lenders under pressure looked for ways to restore investor confidence.

First Republic had different approaches and ideas to it, a third source familiar with the matter said, adding that private equity firms have capital to deploy and were looking for opportunities.

They added that negotiations on the private equity deal ended when First Republic announced its credit line with JPMorgan.

First Republic was not immediately available for comment.

The move came ahead of the U.S. Federal Reserve and other regulators announcing on Sunday night a series of emergency measures to bolster confidence in the banking system, removing some of the urgency to make a deal, the sources said.

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First Republic said Sunday evening that it had secured additional financing through JPMorgan, giving it access to a total of $70 billion in funds through various sources. The additional borrowing capacity from the Fed as well as that from JPMorgan had increased the amount of liquidity it had available.

JPMorgan did not immediately respond to requests for comment.

Shares in First Republic fell more than 60% on Monday on fears of banking contagion following the collapse of SVB Financial Group ( SIVB.O ) and Signature Bank ( SBNY.O ). SVB had seen a flight of deposits, many of which were uninsured. First Republic shares recovered some of their losses on Tuesday, rising 27%.

One of the sources said other banks had also been looking for capital, but after the administration’s emergency measures on Sunday and a drop in bank shares the following day, any deal was likely to take time.

In some cases, the situation had turned from banks looking for capital to investors looking for bargains, one of the sources said.

Founded in 1985, First Republic had $212 billion in assets and $176.4 billion in deposits at the end of last year, according to its annual report.

About 70% of its deposits are uninsured, above the 55% median for midsize banks and the third-highest in the group behind Silicon Valley Bank and Signature Bank, according to a note from Bank of America.

The White House on Tuesday weighed in, with an official saying it is closely monitoring developments at First Republic and other smaller banks for actions to protect depositors.

The official said the US banking system was in “a much better position right now” than if the actions had not been taken, and depositors should have confidence that their funds would be protected.

Reporting by Greg Roumeliotis, Paritosh Bansal, Megan Davies; additional reporting by Nupur Anand and Pete Schroeder; editing by Paritosh Bansal and Kim Coghill

Our standards: Thomson Reuters Trust Principles.

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