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First Republic Bank collapses, bought by JP Morgan

Workers clean the exterior of First Republic Bank in San Francisco, California, April 26, 2023.

Justin Sullivan | Getty Images

regulator got First Republic It marked the third US bank failure since March after last-ditch efforts to persuade rival lenders to keep the ailing bank afloat.

JP Morgan Chaseis already the largest U.S. bank by some metrics and has emerged as the winner of First Republic’s weekend auction. It acquires all of the ailing bank’s deposits and a “substantial majority of the assets” of the New York-based bank. Said.

JP Morgan has about $92 billion in deposits in the deal, including $30 billion that JP Morgan and other big banks put into First Republic last month. Banks have also underwritten $173 billion in loans and $30 billion in securities.

The Federal Deposit Insurance Corporation agreed to share losses on the mortgages and commercial loans JP Morgan underwrote in the transaction, and also provided a $50 billion line of credit.

JP Morgan said it would pay the FDIC $10.6 billion.

suddenly The collapse of Silicon Valley Bank In March, First Republic was spotlighted as the weakest link in the US banking system. Like his SVB, which served the tech startup community, First Republic was also a California-based professional lender of sorts. It focused on serving wealthy coastal Americans, luring them in with low-interest mortgages instead of leaving cash in the bank.

But that model fell apart in the wake of the SVB collapse, and as First Republic customers withdrew over $100 billion in deposits, banks Revealed in financial statements April 24th. Financial institutions with a high proportion of uninsured deposits, such as SVB and First Republic, found themselves vulnerable as their customers feared losing their savings in a bank run.

First Republic shares were down 97% at the close on Friday.

$13 billion hit

weekend auction, I made a bid Interest from JPMorgan Chase & Co. and PNC, as well as other banks, has been in a “very competitive bidding process,” according to the FDIC.

The deal will cost the FDIC’s Deposit Insurance Fund an estimated $13 billion, according to regulators. By comparison, the SVB process cost about $20 billion.

California Department of Financial Protection and Innovation Said On Monday, it owned the First Republic and appointed the FDIC as its trustee. The FDIC has accepted JP Morgan’s bid for the bank’s assets.

“As part of the transaction, First Republic Bank’s 84 offices in eight states will reopen during normal business hours today as JPMorgan Chase Bank, National Association branches,” the FDIC said. the FDIC said. said in a statement“All First Republic Bank depositors will become JPMorgan Chase Bank, National Association depositors and will have full access to all deposits.”

JP Morgan CEO Jamie Dimon touted the acquisition in a statement early Monday morning.

“Our government called on us and others to step up and we did,” he said. “This acquisition will provide moderate returns for the company as a whole, benefit our shareholders, help us further advance our asset strategy, and complement our existing franchise.”

In the wake of Monday morning’s takeover, the Treasury Department sought to reassure Americans about the country’s financial system.

“The banking system remains healthy and resilient, and Americans have confidence in the safety of their deposits and the ability of the banking system to perform its important function of providing credit to businesses and families,” a Treasury Department spokesperson said. should have it,” he said.

weak ties

First Republic’s first-quarter deposit outflow forced it to borrow heavily from the Federal Reserve to sustain operations. Financing costs are now much higher, which has squeezed the company’s margins. First Republic recently accounted for 72% of all borrowings from the Fed’s discount window, according to Doug Peta, chief strategist at BCA Research.

On April 24th, First Republic CEO Michael Roffler tried to paint a picture of stability after the events of March. Deposit outflows have slowed in recent weeks, he said.but stock tank After the company disavowed previous financial guidance and Roffler opted not to take questions after an unusually short conference call.

Bank advisers hoped to persuade the largest US bank to back the First Republic again.One version of the plan circulated recently By requiring banks to charge above-market interest rates on bonds on First Republic’s balance sheet, it was able to raise capital from other sources.

But ultimately the bank united An attempt to inject $30 billion in deposits into First Republic in March failed to agree to a bailout plan, prompting regulators to take action, ending the bank’s 38-year run.

Summarize this content to 100 words Workers clean the exterior of First Republic Bank in San Francisco, California, April 26, 2023. Justin Sullivan | Getty Imagesregulator got First Republic It marked the third US bank failure since March after last-ditch efforts to persuade rival lenders to keep the ailing bank afloat.JP Morgan Chaseis already the largest U.S. bank by some metrics and has emerged as the winner of First Republic’s weekend auction. It acquires all of the ailing bank’s deposits and a “substantial majority of the assets” of the New York-based bank. Said.JP Morgan has about $92 billion in deposits in the deal, including $30 billion that JP Morgan and other big banks put into First Republic last month. Banks have also underwritten $173 billion in loans and $30 billion in securities.The Federal Deposit Insurance Corporation agreed to share losses on the mortgages and commercial loans JP Morgan underwrote in the transaction, and also provided a $50 billion line of credit.JP Morgan said it would pay the FDIC $10.6 billion.suddenly The collapse of Silicon Valley Bank In March, First Republic was spotlighted as the weakest link in the US banking system. Like his SVB, which served the tech startup community, First Republic was also a California-based professional lender of sorts. It focused on serving wealthy coastal Americans, luring them in with low-interest mortgages instead of leaving cash in the bank.But that model fell apart in the wake of the SVB collapse, and as First Republic customers withdrew over $100 billion in deposits, banks Revealed in financial statements April 24th. Financial institutions with a high proportion of uninsured deposits, such as SVB and First Republic, found themselves vulnerable as their customers feared losing their savings in a bank run.First Republic shares were down 97% at the close on Friday.$13 billion hitweekend auction, I made a bid Interest from JPMorgan Chase & Co. and PNC, as well as other banks, has been in a “very competitive bidding process,” according to the FDIC.The deal will cost the FDIC’s Deposit Insurance Fund an estimated $13 billion, according to regulators. By comparison, the SVB process cost about $20 billion.California Department of Financial Protection and Innovation Said On Monday, it owned the First Republic and appointed the FDIC as its trustee. The FDIC has accepted JP Morgan’s bid for the bank’s assets.”As part of the transaction, First Republic Bank’s 84 offices in eight states will reopen during normal business hours today as JPMorgan Chase Bank, National Association branches,” the FDIC said. the FDIC said. said in a statement“All First Republic Bank depositors will become JPMorgan Chase Bank, National Association depositors and will have full access to all deposits.”JP Morgan CEO Jamie Dimon touted the acquisition in a statement early Monday morning.”Our government called on us and others to step up and we did,” he said. “This acquisition will provide moderate returns for the company as a whole, benefit our shareholders, help us further advance our asset strategy, and complement our existing franchise.”In the wake of Monday morning’s takeover, the Treasury Department sought to reassure Americans about the country’s financial system.“The banking system remains healthy and resilient, and Americans have confidence in the safety of their deposits and the ability of the banking system to perform its important function of providing credit to businesses and families,” a Treasury Department spokesperson said. should have it,” he said.weak tiesFirst Republic’s first-quarter deposit outflow forced it to borrow heavily from the Federal Reserve to sustain operations. Financing costs are now much higher, which has squeezed the company’s margins. First Republic recently accounted for 72% of all borrowings from the Fed’s discount window, according to Doug Peta, chief strategist at BCA Research.On April 24th, First Republic CEO Michael Roffler tried to paint a picture of stability after the events of March. Deposit outflows have slowed in recent weeks, he said.but stock tank After the company disavowed previous financial guidance and Roffler opted not to take questions after an unusually short conference call.Bank advisers hoped to persuade the largest US bank to back the First Republic again.One version of the plan circulated recently By requiring banks to charge above-market interest rates on bonds on First Republic’s balance sheet, it was able to raise capital from other sources.But ultimately the bank united An attempt to inject $30 billion in deposits into First Republic in March failed to agree to a bailout plan, prompting regulators to take action, ending the bank’s 38-year run.
https://www.cnbc.com/2023/05/01/first-republic-bank-failure.html First Republic Bank collapses, bought by JP Morgan

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