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Citizens' failed bid for First Republic would have doubled the Providence bank's size

Pedestrians walk past the headquarters of First Republic Bank in San Francisco. (Godofredo A. Vásquez/AP)
Pedestrians walk past the headquarters of First Republic Bank in San Francisco. (Godofredo A. Vásquez/AP)

Analysts say Citizens Financial Group's failed bid over the weekend to acquire First Republic Bank shows the Providence-based bank is looking to expand its national footprint.

Citizens was one of several banks that sought to buy First Republic from the Federal Deposit Insurance Corp., according to media reports. The FDIC announced the failed bank's sale to JPMorgan Chase early Monday morning.

A spokesperson for Citizens Financial Group would not comment specifically on the attempted acquisition, but said, "We have a responsibility to our shareholders to explore possibilities that would make strategic sense for the company."

Citizens Bank is the second-largest retail bank in Massachusetts in terms of deposits, according to FDIC data. First Republic was the sixth-largest bank.

Citizens has about $222 billion in total assets, and the purchase of First Republic would nearly have doubled its size. In comparison, New York-based JPMorgan Chase has nearly $4 trillion in assets.

"It's very hard to put in a competitive bid when one of the bidders is almost ten times your size," said Gerard Cassidy, a banking analyst and managing director of U.S. bank equity strategy at RBC Capital Markets.

So-called "mid-sized" banks like First Republic have been under pressure since the failure of Silicon Valley Bank and Signature Bank in March. In both of those cases, regulators have said the banks managed risk poorly in a rising interest rate environment, and sought to boost profits without sufficient caution and controls.

First Republic, with headquarters in San Francisco and branches in several states, including Massachusetts, had a large base of wealthy clients. It quickly became vulnerable to withdrawals — more than $100 billion — by spooked customers after the Silicon Valley collapse.

Some have criticized the FDIC's sale of First Republic to JP Morgan Chase, already the largest bank in the country.

"A poorly supervised bank was snapped up by an even bigger bank — ultimately taxpayers will be on the hook," Sen. Elizabeth Warren tweeted Monday.

Warren is fighting for a suite of banking reforms, including limits on executive compensation.

In the meantime, analysts say there are other paths forward for mid-sized and regional banks like Citizens.

"In banking, it's not necessarily always about getting bigger," RBC's Cassidy said. "It's not a prerequisite that you have to grow to achieve outsize shareholder returns; you do that through profitability."

By that he means smart, targeted investments over sheer growth. Cassidy said missing out on acquiring First Republic will not be Citizens' only opportunity to boost profits.


Walter Wuthmann General Assignment Reporter
Walter Wuthmann is a general assignment reporter for WBUR.



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