JPMorgan Chase yesterday announced it has acquired the substantial majority of assets and assumed the deposits and certain other liabilities of First Republic Bank from the Federal Deposit Insurance Corporation (FDIC).
In carrying out this transaction, JPMorgan Chase is supporting the U.S. financial system through its significant strength and execution capabilities. As part of the purchase, JPMorgan Chase is assuming all deposits – insured and uninsured, it said in a statement on its website.
JPMorgan Chase is a leading U.S. financial services firm, with operations worldwide. JPMorgan Chase had $3.7 trillion in assets and $303 billion in stockholders’ equity as of March 31, 2023.
“Our government invited us and others to step up, and we did,” said Jamie Dimon, Chairman and CEO of JPMorgan Chase. “Our financial strength, capabilities and business model allowed us to develop a bid to execute the transaction in a way to minimize costs to the Deposit Insurance Fund.”
Dimon added, “This acquisition modestly benefits our company overall, it is accretive to shareholders, it helps further advance our wealth strategy, and it is complementary to our existing franchise.”
Key transaction elements following the FDIC’s competitive bidding process include:
Acquisition of the substantial majority of First Republic Bank’s assets, including approximately $173 billion of loans and approximately $30 billion of securities;
Assumption of approximately $92 billion of deposits, including $30 billion of large bank deposits, which will be repaid post-close or eliminated in consolidation;
FDIC will provide loss share agreements covering acquired single-family residential mortgage loans and commercial loans, as well as $50 billion of five-year, fixed-rate term financing;
JPMorgan Chase is not assuming First Republic’s corporate debt or preferred stock.
First Republic branches opened on Monday, as normal, and clients will continue to receive uninterrupted service, including digital and mobile banking capabilities.
This acquisition modestly benefits our company overall, it is accretive to shareholders, it helps further advance our wealth strategy, and it is complementary to our existing franchise.
Transaction expectations
In turn, JPMorgan Chase is expected to:
Recognize an upfront, one-time, post-tax gain of approximately $2.6 billion, which does not reflect the approximately $2.0 billion dollars of post-tax restructuring costs anticipated over the next 18 months;
Remain very well-capitalized with a CET1 ratio consistent with its 1Q 24 target of 13.5% and maintain healthy liquidity buffers;
The transaction is expected to be modestly EPS accretive and generate more than $500 million of incremental net income per year, not including the approximately $2.6 billion one-time post-tax gain or approximately $2.0 billion of post-tax restructuring costs expected over the course of 2023 and 2024.
The acquired First Republic businesses will be overseen by JPMorgan Chase’s Consumer and Community Banking (CCB) Co-CEOs, Marianne Lake and Jennifer Piepszak.
“First Republic has built a strong reputation for serving clients with integrity and exceptional service,” said Lake and Piepszak. “We look forward to welcoming First Republic employees. As always, we are committed to treating employees with respect, care and transparency.”
