First Republic Bank to weigh up to US$100 billion in asset sales

First Republic Bank is exploring divesting US$50 billion to $100 billion of long-dated securities and mortgages as part of a broader rescue plan, according to people with knowledge of the matter.

Any sales would help reduce the bank’s asset-liability mismatch, the people said, asking not to be identified discussing confidential information. Potential buyers, including large U.S. banks, could potentially receive warrants or preferred equity as an incentive to buy assets above their market value, one of the people said. 

The lender is trying to shore up its balance sheet to avoid being seized by the Federal Deposit Insurance Corp. and clear the path for a possible capital raise, the person said. It may need the U.S. government to facilitate negotiations with some of the country’s largest banks to stabilize the lender as it executes its turnaround, the person added. That would be a much cheaper alternative than a failure of the company. 

A spokesman for the San Francisco-based firm declined to comment.