JPMorgan to buy First Republic Bank as regulators seize control | Business and Economy News

First Republic Bank became the third major US institution to fail in two months.

US financial authorities have seized California’s troubled First Republic Bank and sold it to JPMorgan Chase, hoping to bring to a close a two-month banking crisis that has spooked the financial system.

First Republic Bank became the third major US institution to fail in two months.

The deal, announced early on Monday, will see the banking giant take $173bn of loans, $30bn of securities and $92bn of deposits from the failed lender. There were no details on how much JPMorgan would pay.

The bank came under intense pressure after disclosing last week that it had suffered more than $100bn 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 percent in premarket trading. The stock has lost 97 percent of its value this year. JPMorgan shares rose 2.7 percent.

JPMorgan was one of several interested buyers, including PNC Financial Services Group, and Citizens Financial Group, 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 Federal Deposit Insurance Corporation (FDIC) would act as its receiver.

The FDIC estimated in a statement that the cost to the Deposit Insurance Fund would be about $13bn. The final cost will be determined when the FDIC terminates the receivership.

‘Stepping up’

The rescue comes less than two months after a deposit flight from US lenders forced the Federal Reserve to step in with emergency measures to stabilise markets. Those failures came after crypto-focused Silvergate voluntarily liquidated.

JPMorgan said it expected to achieve a one-time, post-tax gain of approximately $2.6bn after the deal, which did not reflect an estimated $2bn of post-tax restructuring costs likely over the next 18 months.

The failed bank’s 84 offices in eight states will reopen as branches of JPMorgan Chase Bank from Monday, according to the JPMorgan statement.

JPMorgan has been on an acquisition spree since 2021, acquiring more than 30 companies.