JPMorgan buys First Republic Bank as third major US bank fails in two months

US regulators said Monday that First Republic Bank has been seized and the bank has been agreed to be sold to JPMorgan Chase & Co, in the third major US institution to fail in two months.

JPMorgan said in a statement that the banking giant will take out $173 billion in loans and about $30 billion in securities for First Republic Bank, including $92 billion in deposits. It does not assume corporate debt or preference shares of the bank.

Shares of First Republic Bank plunged 36 percent in pre-market trading. The stock has lost 97 percent of its value this year. JPMorgan shares rose 2.6 percent, while S&P 500 futures traded flat.

Sources familiar with the matter said over the weekend that JPMorgan was one of several interested buyers, including financial services group PNC and Citizens Financial Group, that made its final bids on Sunday in an auction run by US regulators.

The California Department of Financial Protection and Innovation announced early Monday that it has acquired First Republic and will serve as the recipient of the Federal Deposit Insurance Corporation (FDIC).

The Corporation estimated in a statement that the cost of the Deposit Insurance Fund would amount to about $13 billion. The final cost will be determined when the FDIC ends the receivership.

Rescue comes below After two months of Silicon Valley Bank and Signature Bank It failed amid a flight of deposits from US lenders, forcing the Federal Reserve to intervene with emergency measures to stabilize the markets. These failures came after cryptocurrency-focused Silvergate was voluntarily liquidated.

is reading: Everything you need to know about the Silicon Valley Bank saga

“Our government and others have called on us to step up, and we have done so,” said Jamie Dimon, Chairman and CEO of JPMorgan Chase. “Our financial strength, capabilities and business model have allowed us to develop a bid to execute the transaction in a way that minimizes costs to the Deposit Insurance Fund.”

JPMorgan said it expects a one-time after-tax gain of about $2.6 billion after the deal, which does not reflect an estimated $2 billion in after-tax restructuring costs likely over the next 18 months.

He said the bank would be “extremely well capitalized” having its common equity ratio (CET1) in line with its target for Q1 2024 of 13.5%, and maintaining good precautionary liquidity.

The failed bank’s 84 offices in eight states will reopen as branches of JPMorgan Chase Bank starting Monday, according to a JPMorgan statement.

JPMorgan has been on an acquisition spree since 2021, acquiring more than 30 companies in deals worth more than $5 billion combined.

In recent years, US regulators have been slow to approve large bank deals. The Biden administration has also cracked down on anti-competitive practices.