First Republic spoke with private equity before securing funding sources

NEW YORK, March 15 (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 (JPM.N) and US authorities intervened with support for the industry, said two sources familiar with the matter.

The talks, previously unreported, shed new light on the frenzied activity that took place over the weekend following the collapse of Silicon Valley Bank as other lenders scrambled to look for ways to restore investor confidence.

First Republic had put forward different approaches and ideas, 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 talks on the private equity deal ended when First Republic announced its line of credit with JPMorgan.

First Republic was not immediately available for comment.

The move came before the U.S. Federal Reserve and other regulators announced a series of emergency measures on Sunday evening to bolster confidence in the banking system, which removed some of the urgency to strike a deal, the sources said.

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

JPMorgan did not immediately respond to requests for comment.

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

One of the sources said other banks were also looking for capital, but after the government’s emergency measures on Sunday and a fall in bank shares the following day, any deal would likely 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, according to its annual report at the end of last year.

About 70% of deposits are uninsured, more than the 55% median for medium-sized 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 weighed in on Tuesday, with an official saying it is closely monitoring developments at First Republic and other smaller banks following moves to protect depositors.

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

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

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