JPMorgan will “assume all deposits, including all uninsured deposits, and substantially all assets” of First Republic, the California Department of Financial Protection and Innovation said in a statement.
The California regulator had appointed the US Federal Deposit Insurance Corporation as receiver of the bank. “Deposits are federally insured by the FDIC subject to applicable limits,” the DFPI said in its statement.
This comes after the regulators saw less chances of a rescue of the San Francisco-based and after private-sector efforts failed to yield a deal.
Banks were earlier reluctant to invest money to rescue the troubled regional lender in recent days, but some were said to be interested to make offers if it is auctioned.
A group of 11 banks had deposited $30 billion into First Republic in March to help it have time for finding a solution. These included JPMorgan Chase & Co, Citigroup, Bank of America, Wells Fargo, Goldman Sachs and Morgan Stanley.
As of April 13, 2023, First Republic Bank had total assets of approximately $229.1 billion and total deposits of approximately $103.9 billion, the California regulator said.The US banking behemoth said in a statement it will take $173 billion of loans and about $30 billion of securities of First Republic Bank including $92 billion of deposits. However, it will not assume the bank’s corporate debt or preferred stock.
JPMorgan, the biggest lender in the US, will now grow bigger in size with the acquisition. Under normal circumstances, US regulatory restrictions would have averted a further increase in the lender’s deposit base given JPMorgan’s size and current share of US deposits.
First Republic got into a widening crisis following the collapse of SVB and Signature Bank. Wealthy clients started withdrawing deposits from First Republic, leaving the bank to struggle.
Rapidly policy rate increase spelled trouble for some businesses to pay back or service loans, triggering risks of losses for lenders who were already reeling under recession fears.
PNC Financial Services Group, JPMorgan Chase & Co and Citizens Financial Group Inc were among banks that submitted final bids for First Republic Bank on Sunday in an auction by U.S. regulators, sources familiar with the matter had told Reuters.
Last week, Federal Deposit Insurance Corporation had asked banks including JPMorgan and PNC Financial to submit final bids for First Republic Bank by Sunday. FDIC reached out to banks late Thursday seeking indications of interest, including a proposed price and an estimated cost to the agency’s deposit insurance fund, Bloomberg had reported. Based on those submissions Friday, the regulator invited at least two firms to the next step in the bidding process, the sources said on condition of anonymity.
First Republic Bank’s shares had plunged up to 54% in extended New York trading on Friday on speculations of seizure by the US banking regulator. The bank’s shares have nosedived 97% so far this year. On Friday, the bank’s stock closed 43% lower and hit a record low of $2.99 apiece.
FDIC had decided the lender’s position has deteriorated and there is no more time to pursue a rescue through the private sector.
First Republic catered to wealthier people, much like Silicon Valley Bank that focused on venture capital firms. First Republic, which started with 10 employees in 1985 was ranked as the 14th-largest in the US by July 2000. It had 80 offices in seven states and employed more than 7,200 people as of the end of 2022.