This Monday it was announced that JPMorgan Chase Bank acquired First Republic Bank from the Federal Deposit Insurance Corporation (FDIC, for its acronym in English). with the vast majority of assets and assumed deposits and other liabilities.
As part of the purchase, JPMorgan Chase assumes all deposits, insured and uninsured.
"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 an offer to execute the transaction in a way that minimizes costs to the Deposit Guarantee Fund."
Dimon added that the acquisition modestly benefits JPMorgan Chase overall, "is beneficial to shareholders, helps further advance our equity strategy, and is complementary to our existing franchise."
Key elements of the transaction following the FDIC's competitive bidding process include the acquisition of the vast majority of First Republic Bank's assets, including approximately $173 billion in loans and approximately $30 billion in securities.
Also, assuming approximately $92 billion in deposits, including $30 billion of large bank deposits, which will be refunded after closing or eliminated in consolidation.
The FDIC will provide loss-sharing agreements covering purchased single-family residential mortgage loans and commercial loans, as well as $50 billion of five-year fixed-rate term financing.
It should be noted that JPMorgan Chase will not assume First Republic's corporate debt or preferred stock.
While San Francisco-based First Republic Bank was closed Monday by the California Department of Financial Protection and Innovation, branches opened Monday, May 1, as usual, and customers continued to receive uninterrupted service, including digital and mobile banking capabilities. However, now they serve as one more branch of JPMorgan Chase.
As a result of this transaction, JPMorgan Chase said in a statement that it expects to recognize a one-time upfront after-tax gain of approximately $2.6 billion, which does not reflect the approximately $2 billion of after-tax restructuring costs. anticipated over the next 18 months.
Similarly, the bank expects the transaction to modestly increase earnings per share and generate more than $500 million in incremental net income per year, not including approximately $2.6 billion in one-time gains after taxes or approximately 2 billion of expected after-tax restructuring costs over the course of 2023 and 2024.
The acquired First Republic businesses will be overseen by JPMorgan Chase co-CEOs of Consumer and Community Banking (CCB), Marianne Lake and Jennifer Piepszak.
"First Republic has built a strong reputation for serving clients with integrity and exceptional service," Lake and Piepszak said. “We look forward to welcoming First Republic employees. As always, we are committed to treating employees with respect, care and transparency."
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