J.P. Morgan acquires First Republic

J.P. Morgan 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, the bank is supporting the US financial system through its significant strength and execution capabilities. As part of the purchase, J.P. Morgan is assuming all deposits – insured and uninsured.

“Our government invited us and others to step up, and we did,” said Jamie Dimon, chair and CEO of J.P. Morgan, in a statement. “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. 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
  • J.P. Morgan is not assuming First Republic’s corporate debt or preferred stock
  • First Republic branches will open on Monday, May 1, as normal, and clients will continue to receive uninterrupted service, including digital and mobile banking capabilities.

As a result of this transaction, J.P. Morgan expects 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 the bank’s Consumer and Community Banking co-CEOs, Marianne Lake and Jennifer Piepszak, who said in a combined statement: “First Republic has built a strong reputation for serving clients with integrity and exceptional service. We look forward to welcoming First Republic employees. As always, we are committed to treating employees with respect, care and transparency.”

Source

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