Exclusive WSJ News | The largest US banks race to save the First Republic

The largest banks in the US, including JPMorgan Chase JPM 1.30%

& Co., discuss a joint bailout of First Republic Bank FRC -20.06%

That could involve a sizeable capital injection to prop up the troubled lender, people familiar with the matter said.

JPMorgan works with Citigroup inc,

C 0.73%

Bank of America corp

and Wells Fargo & Co. to offer a lifeline to First Republic, people said. Other stakeholders include Morgan Stanley and Goldman Sachs Group inc

and US Bancorp and PNC Financial Services Group inc,

pnc 2.99%

said the people.

The deal could be unveiled as early as today, people said.

The situation is fluid and whether a deal will come about and what it might look like is still highly uncertain. Any deal would need regulators’ blessings and will be driven, at least in part, by the bank’s highly volatile stocks. First Republic stock has been battered for days, falling another 31% Thursday morning on concerns over the bank’s health following the collapse of Silicon Valley Bank.

If there is a deal, it could come together in the coming days, the population said.

First Republic came under the spotlight after the collapse of Silicon Valley Bank last week raised concerns about other regional banks with large collections of uninsured deposits. Customers withdrew billions in deposits from First Republic over the weekend, and the bank sought to stem the tide with a deal announced Sunday that included additional funding from the Federal Reserve and JPMorgan, giving the bank a total of $70 billion in available liquidity.

The bank has said it is stable and deposit losses are not overwhelming, people familiar with the matter said.

But S&P Global Ratings downgraded the bank’s bonds to junk status on Wednesday and investors continued to sell, fueling further uncertainty.

The bank’s stock is down about three quarters this week. Its market cap has fallen to less than $5 billion from $21 billion on March 8, when the SVB crisis began.

The fast-moving situation is reminiscent of the drama in the banking system during the 2008 financial crisis, when JPMorgan and its CEO Jamie Dimon played the role of the white knight and bought Bear Stearns and then Washington Mutual. Trials, losses and political pressure followed. Mr Dimon has said he would never again sign a government-led bailout deal.

First Republic’s business and stock valuation has long been the envy of the banking industry. Their customers are wealthy individuals and companies, mainly on the coasts. The lending business revolves around giving huge mortgages to clients like Mark Zuckerberg. Few of these loans ever went wrong. The bank had approximately $213 billion in assets at the end of 2022.

The bank’s profits surged in 2022, but the Fed’s aggressive rate hikes took their toll. First Republic’s wealthy clients were no longer content with leaving huge sums of money in bank accounts that didn’t earn interest.

Write to David Benoit at David.Benoit@wsj.com and AnnaMaria Andriotis at annamaria.andriotis@wsj.com

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