JPMorgan Chase takes over First Republic Bank's assets in Govt-backed deal
text_fields
JPMorgan Chase & Co has successfully acquired First Republic Bank, following an emergency government-led intervention after private rescue efforts failed to fill a hole in the troubled lender's balance sheet.
The move comes after customers withdrew their deposits, leaving First Republic in a dire financial position. The sale was orchestrated by the Federal Deposit Insurance Corp., which agreed to share the burden of losses and recoveries on the firm's single-family and commercial loans with JPMorgan.
JPMorgan will take over First Republic's assets, including $173 billion of loans and $30 billion of securities, as well as $92 billion in deposits. JPMorgan CEO Jamie Dimon said in a statement, "Our government invited us and others to step up, and we did. Our financial strength, capabilities and business model allowed us to develop a bid to execute the transaction in a way to minimize costs to the Deposit Insurance Fund."
Although the acquisition makes JPMorgan, the nation's largest bank, even more massive, it had faced regulatory restrictions in the past due to its size and existing share of the US deposit base. Prominent Democratic lawmakers and the Biden administration have also voiced concerns about consolidation in the financial industry.
JPMorgan expects to recognize a one-time gain of $2.6 billion tied to the transaction, but it estimates that it will incur $2 billion in related restructuring costs over the next 18 months. The $92 billion in deposits includes the $30 billion that JPMorgan and other large US banks put into the beleaguered lender in March to try to stabilize its finances. JPMorgan vowed that the $30 billion would be repaid.
Under the loss-sharing agreement, JPMorgan and the FDIC will cover single-family residential mortgage loans and commercial loans, as well as $50 billion worth of five-year, fixed-rate term financing for the $173 billion in loans and $30 billion in securities included in the deal.
Shares of First Republic tumbled more than 33% during premarket trading, putting it on track to extend this year's 97% slump. Meanwhile, JPMorgan's stock rose 3.8% on the back of the successful acquisition.
