JPMorgan Chase wins bid to acquire First Republic Bank in FDIC auction
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JPMorgan Chase, PNC Financial Services Group, and Citizens Financial Group submitted final bids for First Republic Bank in an auction conducted by regulators in the United States. JPMorgan has won the bid after a rigorous process by US regulators saw the bidding process dragging on late into Sunday evening.
JPMorgan to acquire First Republic Bank
US regulators seized the ownership of First Republic Bank on Monday, leading to the failure of the third bank in the US since March. The seizure came after efforts to persuade other lenders to offer funds to keep the bank afloat failed.
JPMorgan Chase is currently the largest bank in the United States, and it has now emerged as the winner of the weekend auction for First Republic Bank. According to a statement, JPMorgan will receive all the deposits from the ailing bank and a significant majority of the assets.
Under this deal, JPMorgan will receive around $92 billion in deposits, including $30 billion that JPMorgan and other leading US banks put into First Republic last month to support the ailing bank unsuccessfully. JPMorgan will acquire $173 billion in loans and $30 billion in securities from First Republic.
The Federal Deposit Insurance Corporation has agreed to share the losses on mortgages and commercial loans assumed by JPMorgan in this deal. The regulator has also extended the bank a $50 billion credit line.
US regulators were trying to secure a deal for First Republic Bank over the weekend. The bank had total assets of $233 billion at the end of Q1 2023. The closure of this bank comes less than two months after Signature Bank and Silicon Valley Bank failed amid an influx of deposit outflows from US lenders, forcing the Federal Reserve to offer emergency measures and stabilize the markets.
One of the largest US banks
By the end of last year, First Republic was the 14th largest lender in the United States, even larger than Silicon Valley Bank. JPMorgan’s acquisition of this bank might have cooled the market, but there are concerns over the amount of support the government needs to offer.
First Republic Bank was founded in 1985. It was acquired by Merrill Lynch in 2007, but Bank of America publicly listed it after the 2008 financial crisis. Over the years, First Republic has targeted high-net-worth clients with preferential rates and mortgages, making it more vulnerable than lenders with a less-affluent clientele base.
The lender recorded over $100 billion in deposit outflows during the first quarter. In March, it received an initial lifeline of $30 billion from 11 Wall Street banks, but the efforts to save the bank remained futile.
By Friday last week, the market value for First Republic had plunged to a low of $557 million, a notable drop from the peak of $40 billion in November 2021. US bank shares have been plunging ahead of the First Republic Bank crisis.
