American multinational banking giant JPMorgan Chase has emerged as the lucky buyer of the embattled regional banking firm, First Republic Bank.
As reported by CNBC, JPMorgan Chase & Co (NYSE: JPM) acquired all of the deposits of First Republic Bank (NYSE: FRC) and a substantial number of its shares. The acquisition was made possible after regulators took a hold of the bank on Monday. This notably placed the collapse of First Republic Bank as the worst in the US banking ecosystem since 2008. According to JPMorgan, it considers the acquisition as its own way of helping to maintain the integrity of the US financial ecosystem.
“Our government invited us and others to step up, and we did,” said Chairman and Chief Executive Officer of JPMorgan Chase Jamie Dimon. “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.”
According to JPMorgan Chase, the deal saw it scoop up $173 billion of loans and approximately $30 billion of securities belonging to First Republic Bank. The combined deposit value of FRC acquired by JPMorgan came in at $92 billion. Notably, this includes the $30 billion that was availed to the collapsed bank by large financial institutions in the US. The firm said these deposits will be repaid in full before closing the deal.
“This acquisition modestly benefits our company overall, it is accretive to shareholders, it helps further advance our wealth strategy, and it is complementary to our existing franchise,” Dimon said.
There has been a lot of commentary with respect to the takeover of FRC by JPMorgan. While some have tagged the acquisition as a way in which the government is consolidating the financial system in readiness for a potential Digital Dollar, others believe the whole move reveals the fragility of the US banking system.
Future of First Republic as a JPMorgan Offshoot
JPMorgan is one of the biggest banking giants in the United States and for what it is worth, First Republic will benefit from the deep capital base the firm has, as well as its deep client base.
JPMorgan said that it expects the transaction to be “modestly EPS accretive and generate more than $500 million of incremental net income per year, not including the approximately $2.6 billion one-time post-tax gain or approximately $2.0 billion of post-tax restructuring costs expected over the course of 2023 and 2024.”
Despite the collapse of First Republic, it was acknowledged that the bank dealt with its clients with a high level of integrity. This, JPMorgan noted, will be beneficial to sustaining the bank’s business moving forward.
The shares of JPMorgan popped following the acquisition news. At the close of Monday’s trading session, JPM closed at 2.14% to $141.20. First Republic stock is down 45% in the after hours.
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