JPMorgan Chase Wins the Bid to Buy First Republic Bank

U.S. Federal Deposit Insurance Corporation (FDIC) said on Monday (May 1) that First Republic Bank has been seized and a deal agreed to sell the bank to JPMorgan Chase & Co, in what is the third major United States institution to fail in two months.

The banking giant will take US$173 billion of loans and about US$30 billion of securities of First Republic Bank including US$92 billion of deposits, JPMorgan said in a statement. It is not assuming the bank's corporate debt or preferred stock.

First Republic Bank shares tumbled 36% in premarket trading. The stock has lost 97% of its value this year. 

JPMorgan was one of several interested buyers including PNC Financial Services Group, and Citizens Financial Group, which submitted final bids on Sunday in an auction being run by US regulators, sources familiar with the matter said over the weekend.

The FDIC estimated in a statement that the cost to the Deposit Insurance Fund would be about US$13 billion. The final cost will be determined when the FDIC terminates the receivership.

JPMorgan said it expected to achieve a one-time, post-tax gain of approximately US$2.6 billion after the deal which did not reflect an estimated US$2 billion dollars of post-tax restructuring costs likely over the next 18 months.

It said the bank would be "very well-capitalised" after with a common equity tier one (CET1) ratio consistent with its first quarter 2024 target of 13.5 per cent, and maintain healthy liquidity buffers.

The failed bank's 84 offices in eight states will reopen as branches of JPMorgan Chase Bank from Monday, according to the JPMorgan statement.

Source: CNA