The U.S. federal agency, which guarantees bank deposits, announced Monday that JPMorgan Chase Bank will acquire all of First Republic Bank’s deposits and most of its assets.
In a statement, the Federal Deposit Insurance Corporation (FDIC) revealed that California regulators have shut down First Republic Bank and that JPMorgan Chase is acquiring “all of First Republic Bank’s deposits and substantially all of its assets.”
Similar, First Republic Bank’s 84 branches in eight states reopen today as branches of JPMorgan Chase Bank.
San Francisco-based First Republic has struggled since the collapse of Silicon Valley Bank and Signature Bank in March.
Regulators over the weekend tried to find a solution for the opening of US stock markets, the Associated Press (AP) news agency reported.
Shares of First Republic closed at $3.51 last Friday, compared to about $170 a year ago.
First Republic is tipped as the second most likely bank to fail due to its large number of unsecured deposits and exposure to low-interest loans.
Before the bankruptcy of Silicon Valley Bank, most in the industry were jealous of First Republic: Its customers — most of them wealthy and powerful — rarely defaulted on their loans, the AP recalls.
The bank made much of its money by providing cheap loans to very wealthy people, including Mark Zuckerberg, the co-founder of Facebook.
First Republic saw its total assets more than double to 112 billion euros ($102 billion) at the end of the first quarter of 2019.
But the vast majority of First Republic deposits, such as those at Silicon Valley and Signature Bank, were uninsured, i.e., above the €274,000 ($250,000) threshold set by the FDIC.
This situation has analysts and investors worried that if First Republic were to go bankrupt, depositors might not get all of their money back.
Those fears were reflected in the bank’s recent quarterly results, which admitted depositors withdrew more than $100 billion from the bank during the April crisis.
Since then, the First Republic has been looking for a way to get back on its feet quickly, with plans to sell unprofitable assets, including the low-interest mortgages it issued to wealthy clients.
It also announced plans to lay off up to a quarter of its workforce, which would total about 7,200 employees by the end of 2022. But investors remained sceptical.
In many parts of the world, markets are closed today for Labor Day: the two Asian markets that were open, in Tokyo and Sydney, rose, while US futures showed little change, with the S&P 500 up nearly 0.1% , an increase in the Associated Press.
Source: DN
