First Republic talked to private equity before securing funding sources

NEW YORK (Reuters) – First Republic Bank (FRC.N) spoke to at least one private equity firm about raising capital before it secured funding from JPMorgan Chase & Co. and U.S. authorities stepped in to support it, two people familiar with the matter said.

The talks, which were not previously reported, shed new light on the frantic activity that occurred over the weekend after the Silicon Valley bank collapse, as other lenders under pressure looked for ways to restore investor confidence.

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

They added that talks for the private equity deal ended once First Republic announced its line of credit with JPMorgan.

First Republic could not be reached for comment.

The approach came before the US Federal Reserve and other regulators announced Sunday night a series of emergency measures to boost confidence in the banking system, removing some of the urgency for a deal, the sources said.

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First Republic said Sunday night that it has secured additional funding through JPMorgan, giving it access to a total of $70 billion in funds through various sources. Additional borrowing capacity from the Fed as well as from JPMorgan has boosted its liquidity supply.

JPMorgan did not immediately respond to requests for comment.

Shares of the First Republic fell more than 60% on Monday amid fears of banking contagion after the collapse of SVB Financial Group (SIVB.O) and Signature Bank (SBNY.O). SVB saw a flight of deposits, many of which were uninsured. First Republic shares recouped some of their losses on Tuesday, up 27%.

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Other banks have also looked for capital, one of the sources said, but after management’s emergency measures on Sunday and bank stocks plummeting the next day, any deals are likely to take time.

In some cases, the situation has flipped from banks looking for capital to investors looking for deals, one of the sources said.

The First Republic was founded in 1985 and 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, higher than the average of 55% for midsize banks and the third highest in the group after Silicon Valley Bank and Signature Bank, according to a Bank of America note.

The White House on Tuesday came into its own, with an official saying he was carefully watching developments at First Republic and other smaller banks after measures to protect depositors.

The official said the US banking system is in “a much better place right now” than if the measures had not been taken and depositors should be confident that their money will be protected.

(Reporting by Greg Romeliotis, Paritosh Bansal, Megan Davies); Additional reporting by Nupur Anand and Pete Schroeder; Editing by Paritosh Bansal and Kim Coghill

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