Breaking News: First Republic Bank acquired by JPMorgan Chase
JPMorgan Chase has made a significant move by buying back most of the assets of First Republic, a troubled bank that has been rescued by the US officials.
ph: First Republic Bank
JPMorgan has bought back $173 billion in loans and nearly $30 billion in securities but not corporate debt or First Republic preferred stock. The bank expects to record a $2.6 billion profit from the deal but also expects to spend $2 billion on restructuring costs over the next 18 months.
First Republic had more than $220 billion in assets at the time of exposure and was the 14th largest US bank by the end of 2022. The bank has been on the verge of bankruptcy for almost two months, since the collapse of Silicon Valley Bank eroded confidence in regional banks. The client then withdrew $100 billion in deposits from First Republic. The bank's business model relies on interest-free deposits to finance cheap mortgages for wealthy customers. In a high-interest-rate environment, this model has obvious drawbacks. While funding costs rose rapidly, they also had paper losses on mortgages and other long-term assets.
Under the agreement, all depositors, including those exceeding the $250,000 insurance limit, will be allowed access to their funds when 84 First Republic branches reopen on the morning of May 1, as JPMorgan Chase affiliates. JPMorgan said that after the deal, the tier 1 equity ratio will still match its 13.5 percent target for the first quarter. The transaction is expected to increase JPMorgan's net profit by more than $500 million annually, the company estimates.
Breaking News: First Republic Bank acquired by JPMorgan Chase
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