First Republic scores $30B lifeline from 11 banks

UPDATED, March 16, 2023, 3:57 p.m. PT: First Republic Bank, a major multifamily and commercial real estate lender on the West Coast,  has scored a $30 billion lifeline from 11 banks after days of turmoil that rattled investors, led to massive stock swings and concerns about a run on deposits. 

San Francisco-based First Republic held $62 billion worth of residential mortgages across San Francisco, Los Angeles and the rest of California as of the end of 2022, and about $24 billion worth of commercial real estate loans, according to its financial report.

The $30 billion from other banks will be provided in the form of deposits. 

“This show of support by a group of large banks is most welcome, and demonstrates the resilience of the banking system,” according to a joint release from the Federal Deposit Insurance Corp., Treasury Department, Federal Reserve and the Office of the Comptroller of the Currency.

The bank’s stock price was up 13 percent on Thursday and was still rising as of 4 PM ET.

Bank of America, Citigroup, JPMorgan Chase and Wells Fargo will each contribute $5 billion in deposits, according to a joint release from the four banks on Thursday afternoon. Goldman Sachs and Morgan Stanley will each put in $2.5 billion, while BNY Mellon, PNC Bank, State Street, Truist and U.S. Bank will each put in $1 billion. All of the deposits will be uninsured, the banks noted.

“Following the receiverships of Silicon Valley Bank and Signature Bank, there were outflows of uninsured deposits at a small number of banks,” the banks said. “The banking system has strong credit, plenty of liquidity, strong capital and strong profitability. Recent events did nothing to change this.”

The injections of liquidity were seen by some as a quicker path to stability than a sale of the bank outright.

An injection from multiple banks “takes away some of the concerns around M&A and is easier to do than a whole banking acquisition,” according to Grant Butler, an attorney at K&L Gates in Boston. “Hopefully it provides some calming effect to its customer base.”

First Republic did not immediately respond to a request for comment.

The bank’s troubles came after the collapse of both SVB and New York-based Signature Bank, which sparked investor fears that First Republic was also vulnerable. 

The lender has raced to figure out ways to shore up liquidity over the last 24 hours and was said to be exploring a sale on Wednesday night, after two ratings agencies downgraded its credit ratings to junk, citing risk of deposit outflows. 

This story has been updated to include comments from a release from Bank of America, Citigroup, JPMorgan and Wells Fargo.