First Republic Bank suffered when a large volume of its depositors migrated to bigger institutions, after the collapse of Silicon Valley Bank and Signature Bank, and its investors fled when the bank disclosed more than $100bn in outflows last week
JP Morgan Tower, Hyderabad, India. (Credit: Radhamadhab Sarangi/Wikipedia)
JP Morgan Chase has acquired substantially all the assets and certain liabilities of California-based First Republic Bank from the Federal Deposit Insurance Corporation (FDIC).
The transaction resolves the largest US bank failure since the 2008 financial crisis and limits the impact of an anticipated banking crisis, reported Reuters.
First Republic Bank suffered when a large volume of its depositors migrated to bigger institutions, after the collapse of Silicon Valley Bank and Signature Bank, last month.
Major US banks, including Bank of America, Citigroup, JPMorgan Chase, and Wells Fargo, have agreed to inject up to $30bn into First Republic Bank.
Last week, the bank’s investors fled when it disclosed more than $100bn in outflows, as part of its first quarter financial results announced last week.
The California Department of Financial Protection and Innovation has taken control of the troubled US lender and kept it under the supervision of FDIC.
With the sale of its assets to JP Morgan Chase, First Republic becomes the third major US bank failure in two months and the largest since Washington Mutual in 2008.
JPMorgan Chase said that the transaction, which includes all the insured and uninsured deposits of the First Republic Bank, will support the US financial system.
JPMorgan Chase chairman and CEO Jamie Dimon said: “Our financial strength, capabilities and business model allowed us to develop a bid to execute the transaction in a way to minimise costs to the Deposit Insurance Fund.
“This acquisition modestly benefits our company overall, it is accretive to shareholders, it helps further advance our wealth strategy, and it is complementary to our existing franchise.”
JPMorgan Chase has acquired the majority of the US lender’s assets, including about $173bn of loans and $30bn of securities, under FDIC’s competitive bidding process.
It has assumed around $92bn of deposits, including $30bn of large bank deposits, which are expected to be repaid post-close or eliminated in consolidation.
FDIC said that the First Republic Bank’s 84 branch offices in eight states will be reopened as branches of JPMorgan Chase Bank and will continue to provide services to the clients.
The newly acquired branches will be managed by JPMorgan Chase’s Consumer and Community Banking (CCB) co-CEOs, Marianne Lake and Jennifer Piepszak.
Lake and Piepszak said: “First Republic has built a strong reputation for serving clients with integrity and exceptional service. “We look forward to welcoming First Republic employees. As always, we are committed to treating employees with respect, care and transparency.”
Furthermore, FDIC and JPMorgan Chase are signing loss share agreements on single-family residential mortgage loans and commercial loans, purchased from the First Republic.