JPMorgan, Morgan Stanley in talks for First Republic, WSJ says

Several large banks are discussing a potential deal that could include a sizable capital infusion to shore up troubled First Republic.

JPMorgan Chase & Co. and Morgan Stanley are among several large banks discussing a potential deal with First Republic Bank that could include a sizable capital infusion to shore up the troubled California lender, the Wall Street Journal reported, citing people familiar with the matter.

First Republic is working on potential options including a capital raise, the people told the Journal. While a full takeover of the bank is also possible, some of the people said that looks unlikely at this point, the newspaper said.

First Republic’s stock plunged as much as 36% Thursday. The San Francisco-based bank is exploring strategic options including a sale, and was expected to draw interest from larger rivals, Bloomberg News reported late Wednesday.

The lender’s shares have plummeted in the aftermath of regulators’ seizure of fellow regional lenders Silicon Valley Bank and Signature Bank over the past week.

First Republic specializes in private banking and wealth management, and has made an effort to differentiate itself from SVB Financial Group’s Silicon Valley Bank. Unlike SVB, which counted startups and venture firms among its biggest clients, First Republic said that no sector represents more than 9% of total business deposits.

SVB’s Silicon Valley Bank collapsed into Federal Deposit Insurance Corp. receivership Friday after its customer base of tech startups grew concerned and pulled deposits.

First Republic Bank has been working with JPMorgan as it works through its challenges. On Sunday, the same day Signature Bank was taken over by regulators, First Republic said it “further enhanced and diversified its financial position” by securing additional liquidity from the Federal Reserve Bank and JPMorgan.