American banking giant JPMorgan Chase Bank has acquired all assets of First Republic Bank. First Republic Bank’s initial rescue efforts had failed and the bank had put its assets up for sale. The California Department of Financial Protection and Innovation then made the decision to halt First Republic Bank’s operations and signed an agreement with the Federal Deposit Insurance Corporation (FDIC). The FDIC later signed a purchase and assumption agreement with JPMorgan Chase Bank to protect depositors.
Why did First Republic Bank get into this situation?
After announcing that customers had withdrawn $100 billion in deposits in the first quarter, First Republic Bank’s shares saw a significant drop. Later on, the bank’s customers continued to withdraw deposits at a high rate and concerns about financial instability increased, causing the stock price to fall to historic lows. You can learn more about the details of this news by reading our previous article.
The bank’s advisors had been trying to persuade the largest US banks, which had lent $30 billion to First Republic in March, to come to the bank’s aid once again. However, the banks could not agree on a rescue plan and with the involvement of regulatory authorities, the 38-year-old bank’s operations were terminated.
The bank was up for sale, but at that time there were no buyers, and eventually a buyer was found, and it was acquired by JPMorgan Chase Bank.
“The government asked us and others to help, and we did what was necessary. This acquisition provides a modest benefit to our overall firm and also contributes further to our shareholders and wealth strategy.”Jamie Dimon, CEO of JPMorgan
JPMorgan announced that it has acquired all assets of First Republic Bank, which is worth $229.1 billion and has $103.9 billion in deposits.
“The 84 branches of First Republic Bank in eight states will reopen as JPMorgan Chase Bank.”Federal Deposit Insurance Corporation (FDIC)
Annual revenue forecast of $500 million
As a result of the acquisition, JPMorgan Chase will have a one-time gain of $2.6 billion, excluding an estimated $2 billion in restructuring costs to be incurred over approximately 18 months. Additionally, an annual net income increase of over $500 million is expected, excluding the one-time gain or restructuring costs.
Furthermore, the business of First Republic Bank acquired by JPMorgan Chase will be managed by Marianne Lake and Jennifer Piepszak, Co-CEOs of Consumer and Community Banking.
JPMorgan Chase will provide additional details through an investor presentation, and an analyst and investor call will also be held on the same day with CEO Jamie Dimon and CFO Jeremy Barnum.
Overall, the acquisition of all assets of First Republic Bank by JPMorgan Chase Bank indicates that JPMorgan will increase its assets, expand its branches, and add new customers to its portfolio.