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First Republic Bank is to be acquired by JPMorgan. The US regulator accepted JPMorgan’s offer

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First Republic Bank is to be acquired by JPMorgan Chase. The Federal Deposit Insurance Corporation (FDIC) said on Monday that a deal had been agreed to sell the bank.

JPMorgan was one of several interested in taking over the deposits of First Republic Bank of San Francisco. Reuters reported, citing sources familiar with the matter, that bids were also submitted by, among others, PNC Financial Services Group and Citizens Financial Group Inc.

“The Federal Deposit Insurance Corporation accepts JPMorgan Chase’s offer to acquire First Republic Bank’s deposits, including ‘uninsured deposits and substantially all assets’,” the statement said.

JPMorgan said in a statement that it would acquire a $173 billion loan portfolio and approximately $30 billion in First Republic Bank securities, as well as $92 billion in deposits.

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Treasury Department USA is encouraged by the fact that the First Republic Bank case was resolved with the least cost to the Deposit Insurance Fund and in a way that protects all depositors, a spokesman for the department said on Monday, quoted by Reuters. The US Treasury Department also ensured that the US banking system remains healthy and resilient.

First Republic Bank problems

The First Republic deal comes less than two months after the collapse of Silicon Valley Bank and Signature Bank. The Californian bank was the 14th largest lender in the US at the end of 2022, bigger than SVB which was 16th and 29th Signature.

First Republic was founded in 1985 in Ohio. Merrill Lynch acquired the bank in 2007, but it was back in new hands in 2010 after being sold by a new owner after the 2008 financial crisis.

Reuters reminded that for years First Republic Bank lured wealthy customers with offers of mortgages and loans on preferential terms. This strategy made it more vulnerable than regional lenders with less affluent customers. The bank had a high, 68-percent the level of uninsured deposits – indicated.

In the first quarter of this year customers withdrew more than $100 billion worth of deposits from the bank, leaving the bank to scramble for money. The March bailout involving 11 Wall Street banks, which provided First Republic Bank with $30 billion in bailout, proved insufficient, partly because the institutions were unwilling to agree to buy the lender’s bonds at above-market prices.

A source familiar with the situation told Reuters on Friday that the Federal Deposit Insurance Corporation decided that the lender’s situation had deteriorated and there was no time to seek private sector bailout.

First Republic’s market value fell to $557 million on Friday from a high of $40 billion in November 2021.

Main photo source: Takako Hatayama-Phil / Shutterstock

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