JPMorgan Rescues Failed First Republic Bank, Buys Assets and Assumed Deposits

Less than two months after the Federal Reserve intervened with emergency measures to stabilize markets following a deposit flight from U.S. lenders and Silvergate's voluntary liquidation, Reuters reported that JPMorgan Chase & Co has stepped in to rescue First Republic Bank. JPMorgan CEO Jamie Dimon said the bank's financial strength and business model allowed it to execute the deal in a way that would minimize costs to the Deposit Insurance Fund.

JPMorgan expects to achieve a one-time, post-tax gain of approximately $2.6 billion after the deal, but also anticipates an estimated $2 billion post-tax restructuring costs over the next 18 months. The failed bank's 84 offices in eight states will reopen as branches of JPMorgan Chase Bank from Monday. JPMorgan has been acquiring more than 30 companies in deals worth over $5 billion combined since 2021, and the Biden administration has cracked down on anti-competitive practices in recent years, slowing down large bank deals' approval.

First Republic Bank faced severe pressure after revealing over $100 billion in outflows in Q1 2023 and exploring options. JPMorgan Chase & Co will be taking over $173 billion in loans, $30 billion in securities, and $92 billion in deposits from the failed lender, and no details on the deal's financial terms are available yet.

The California Department of Financial Protection and Innovation has taken control of First Republic, with the Federal Deposit Insurance Corporation (FDIC) serving as its receiver, and the FDIC estimates the cost to the Deposit Insurance Fund at around $13 billion.

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Reuters