JPMorgan Chase (NYSE: JPM) jumps over 3% in pre trading session on Monday as the company stated that it has acquired the vast majority of First Republic Bank’s assets as well as the deposits and certain other liabilities from the Federal Deposit Insurance Corporation (FDIC). JPMorgan Chase is assisting the US financial system by carrying out this deal due to its enormous strength and execution skills. JPMorgan Chase is absorbing all deposits, insured and uninsured, as part of the deal.
Jamie Dimon, Chairman and CEO of JPMorgan Chase, remarked that their government urged them and others to stand up, which they did. Their financial strength, capabilities, and business model enabled them to develop a bid to execute the transaction in such a way that the Deposit Insurance Fund’s costs were minimized.
“This acquisition modestly benefits our company overall,” Dimon noted, “it is accretive to shareholders, it helps further advance our wealth strategy, and it is complementary to our existing franchise.”
Following the FDIC’s competitive bidding process, key transaction elements include:
- Purchase of the vast bulk of First Republic Bank’s assets, including about $173 billion in loans and $30 billion in securities.
- Assumption of about $92 billion in deposits, including $30 billion in significant bank deposits, which will be reimbursed or removed after the closing.
- The FDIC will offer loss sharing agreements for acquired single-family residential mortgage loans and commercial loans, as well as $50 billion in fixed-rate term financing over five years.
- First Republic’s corporate debt or preferred shares will not be assumed by JPMorgan Chase.
Clients will continue to receive continuous service, including digital and mobile banking capabilities, when First Republic branches reopen on Monday, May 1.
JPMorgan Chase intends to benefit from this deal in the following ways:
Recognize an initial, one-time post-tax gain of roughly $2.6 billion, which does not include the projected $2.0 billion in post-tax restructuring expenditures over the following 18 months.
Maintain adequate liquidity buffers while being highly well-capitalized with a CET1 ratio consistent with its 1Q 24 objective of 13.5%.
The transaction is expected to be modestly EPS accretive and to generate more than $500 million in incremental net income per year, excluding the approximately $2.6 billion one-time post-tax gain or approximately $2.0 billion in post-tax restructuring costs expected in 2023 and 2024.
Marianne Lake and Jennifer Piepszak, co-CEOs of JPMorgan Chase Consumer and Community Banking (CCB), will supervise the acquired First Republic operations.
“First Republic has built a strong reputation for serving clients with integrity and exceptional service,” Lake and Piepszak stated. “We are excited to welcome First Republic employees.” As always, we are dedicated to treating employees with dignity, respect, and candor.”
