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JPMorgan Acquires First Republic Bank's Assets and Deposits

The United States regulators announced on Monday that First Republic Bank (NYSE: FRC) has been seized. JPMorgan Chase & Co (NYSE: JPM) will acquire the bank in a deal, marking the third major U.S. institution to fail in two months.

First Republic Bank sign
First Republic Bank sign

JPMorgan Assumes $173 Billion in Loans and $92 Billion in Deposits

JPMorgan will take on $173 billion of loans and about $30 billion of securities from First Republic Bank, including $92 billion of deposits. However, the banking giant will not assume the bank's corporate debt or preferred stock.

Stock Market Reaction to First Republic Bank Deal

First Republic Bank's shares dropped 36% in premarket trading, with the stock losing 97% of its value this year. In contrast, JP Morgan shares saw a 2.6% increase, while S&P 500 futures remained flat.

Multiple Bidders for First Republic Bank Acquisition

JPMorgan was among several interested buyers, including PNC Financial Services Group (NYSE: PNC) and Citizens Financial (NYSE: CFG) Group Inc, which submitted final bids on Sunday in an auction run by U.S. regulators.

California Regulators and FDIC Take Action

The California Department of Financial Protection and Innovation took possession of First Republic, while the Federal Deposit Insurance Corporation (FDIC) will act as its receiver. The FDIC estimates a cost of $13 billion to the Deposit Insurance Fund.

Recent Bank Failures Lead to Emergency Measures

The rescue follows the recent failures of Silicon Valley Bank and Signature Bank (OTC: SBNY), which prompted the Federal Reserve to implement emergency measures to stabilize markets. This comes after the voluntary liquidation of crypto-focused Silvergate.

JPMorgan's Role in Minimizing Costs

JPMorgan Chase's Chairman and CEO, Jamie Dimon, stated that the company's financial strength and business model allowed them to develop a bid that minimizes costs to the Deposit Insurance Fund.

JPMorgan logo
JPMorgan logo

Expected Post-Tax Gain and Restructuring Costs

JPMorgan anticipates a one-time, post-tax gain of approximately $2.6 billion after the deal, not reflecting the estimated $2 billion of post-tax restructuring costs likely over the next 18 months.

Maintaining Financial Stability Post-Acquisition

The bank will be "very well-capitalized" after the acquisition, with a common equity tier one (CET1) ratio consistent with its first quarter 2024 target of 13.5% and maintaining healthy liquidity buffers.

Failed Bank's Offices Reopen as JPMorgan Chase Bank Branches

The 84 offices of the failed bank, located across eight states, will reopen as branches of JPMorgan Chase Bank starting Monday.

JPMorgan's Acquisition Spree Since 2021

JPMorgan has been actively acquiring companies since 2021, completing more than 30 deals worth over $5 billion combined.

US Regulators' Stance on Large Bank Deals

In recent years, U.S. regulators have been slow to approve large bank deals, while the Biden administration has cracked down on anti-competitive practices.