Given the profile of its clientele, the bank is one of the establishments particularly watched by investors after the close failures of Silicon Valley Bank, Signature Bank and Silvergate.
Eleven US banks, including Bank of America, Citigroup and JPMorgan, have agreed to pay a total of $30 billion in deposits to struggling First Republic, a sign they say of their “confidence in the country’s banking system”, according to a joint statement.
“This action by America’s largest banks reflects their confidence in First Republic and in banks of all sizes, and demonstrates their overall commitment to helping banks serve their customers and communities,” the statement read.
First Republic, founded in 1985 and headquartered in San Francisco, is the 14th largest U.S. bank by asset size, with $212 billion in assets at the end of 2022.
Particularly supervised establishment
It has offices mainly in California, but also on the east coast (New York, Massachusetts, Connecticut, Florida), in the states of Oregon, Washington and Wyoming. It provides private banking services for individuals and businesses and wealth management.
Given the profile of its clientele, the bank is one of the establishments particularly watched by investors after the close failures of Silicon Valley Bank, Signature Bank and Silvergate.
According to the S&P Global Ratings agency, 68% of the deposits stored at the bank are in accounts exceeding 250,000 dollars, the limit usually guaranteed by the authorities.
Some fear that many customers prefer to place their money in banks presenting no a priori risk of default.
Strategic options
Rating agencies S&P Global Ratings and Fitch on Wednesday downgraded the rating they give to the company’s debt in the category of speculative investments.
“We believe the risk of deposit flight is high at First Republic Bank despite the actions taken by banking regulators and the fact that the bank is actively increasing its borrowing capacity to mitigate the risk associated with last week’s bank failures” , justifies S&P in a note.
According to the Bloomberg agency, which cites sources familiar with the matter, the bank is currently exploring “strategic options”. It could be a sale or a way to bolster its liquidity.
The bank said on Sunday that it had “strengthened and diversified its liquidity” thanks to the facilities offered by the American central bank and JPMorgan Chase.