JPMorgan Chase & Co. won the bidding to acquire First Republic Bank in an emergency government-led intervention after private rescue efforts failed to fill a hole on the troubled lender’s balance sheet and customers yanked their deposits.
JPMorgan will take over First Republic’s assets, including about $173 billion of loans and $30 billion of securities, as well as $92 billion in deposits. JPMorgan and the Federal Deposit Insurance Corp., which orchestrated the sale, agreed to share the burden of losses, as well as any recoveries, on the firm’s single-family and commercial loans.
The transaction makes JPMorgan, the nation’s largest bank, even more massive – an outcome government officials have taken pains to avoid in the past. Because of US regulatory restrictions, JPMorgan’s size and its existing share of the US deposit base would prevent it under normal circumstances from expanding its deposit base further via an acquisition. And prominent Democratic lawmakers and the Biden administration have chafed at consolidation in the financial industry and other sectors.
JPMorgan expects to recognize a one-time gain of $2.6 billion tied to the transaction, according to a statement. The bank estimated it will incur $2 billion in related restructuring costs over the next 18 months.
The $92 billion in deposits includes the $30 billion that JPMorgan and other large US banks put into the beleaguered lender in March to try to stabilize its finances. JPMorgan vowed that the $30 billion would be repaid.
