JPMorgan Chase & Co has agreed to buy First Republic Bank after the regulatory authorities took over the troubled lender, a statement said on Monday.
JPMorgan is expected to assume all of First Republic’s uninsured and insured deposits, in addition to substantially all of its assets, according to a statement by the California Department of Financial Protection and Innovation.
The California regulator had appointed the US Federal Deposit Insurance Corporation as receiver of the bank. “Deposits are federally insured by the FDIC subject to applicable limits,” the DFPI said in its statement.
This comes after the regulators saw less chances of a rescue of the San Francisco-based firm and after private-sector efforts failed to yield a deal.
Banks were earlier reluctant to invest money to rescue the troubled regional lender in recent days, but some were said to be interested to make offers if it is auctioned.
A group of 11 banks had deposited $30 billion into First Republic in March to help it have time for finding a solution.
They include JPMorgan Chase & Co, Citigroup, Bank of America, Wells Fargo, Goldman Sachs and Morgan Stanley.
As of April 13, 2023, First Republic Bank had total assets of approximately $229.1 billion and total deposits of approximately $103.9 billion, the California regulator said.
The FDIC has accepted a bid from JPMorgan Chase Bank, National Association, Columbus, Ohio, to assume all deposits, including all uninsured deposits, and all assets of First Republic Bank, the statement said on Monday.
JPMorgan, the biggest lender in the US, will now grow bigger in size with the acquisition. Under normal circumstances, US regulatory restrictions would have averted a further increase in the lender’s deposit base given JPMorgan’s size and current share of US deposits.
First Republic got into a widening crisis following the collapse of Silicon Valley Bank and Signature Bank.
Wealthy clients started withdrawing deposits from First Republic, leaving the bank to struggle.
Rapidly policy rate increase spelled trouble for some businesses to pay back or service loans, triggering risks of losses for lenders who were already reeling under recession fears.
PNC Financial Services Group, JPMorgan Chase & Co and Citizens Financial Group Inc were among banks that submitted final bids for First Republic Bank on Sunday in an auction by U.S. regulators, sources familiar with the matter had told Reuters.
First Republic Bank’s shares had plunged up to 54% in extended New York trading on Friday on speculations of seizure by the US banking regulator. The bank’s shares have nosedived 97% so far this year. On Friday, the bank’s stock closed 43% lower and hit a record low of $2.99 apiece.
FDIC had decided the lender’s position has deteriorated and there is no more time to pursue a rescue through the private sector.
