JPMorgan to take over troubled bank

JPMorgan Chase & Co said on Monday it will buy most of First Republic Bank after US regulators seized the troubled bank over the weekend, marking the third major US lender to fail in two months.

As part of the deal, JPMorgan will make a payment of $10.6 billion to the US Federal Deposit Insurance Corp (FDIC) to buy most of the San Francisco-based lender’s assets.

The bank has also entered into a loss-share agreement with the FDIC on single family, residential and commercial loans it bought but will not take First Republic Bank’s corporate debt or preferred stock.

First Republic came under intense pressure after disclosing last week that it had suffered more than $100 billion in outflows in the first quarter and was exploring options.

That also renewed stress on the banking sector, which was reeling from the closure of Silicon Valley Bank and Signature Bank in March, while Swiss lender Credit Suisse was bought by rival UBS in a state-engineered takeover. First Republic Bank shares tumbled 43.3% in pre-market trading before being halted. The stock has lost 97% of its value this year. JP Morgan shares rose 2.7%.

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

The California Department of Financial Protection and Innovation said it had taken possession of First Republic and the FDIC would act as its receiver. The FDIC estimated that the cost to the Deposit Insurance Fund (DIF) would be about $13 billion. The final cost will be determined when the FDIC terminates the receivership.

Published in The Express Tribune, May 2^nd, 2023.

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