SVB, Signature and now First Republic Bank… The American banking sector is registering a new failure. And it is this time JPMorgan who plays the firefighters. Financial authorities have taken control of the ailing Californian bank First Republic Bank which will be acquired by the American banking giant JPMorgan, announced on Monday the FDIC, the agency in charge of guaranteeing bank deposits and the bank.
“Our government called on us and others to intervene, and we did,” JPMorgan CEO Jamie Dimon said in a separate statement.
“Our financial strength, capabilities, and business model allowed us to provide an offer to execute the transaction in a manner that minimized costs to the deposit insurance fund,” the FDIC said. added.
Reopening under a new name
The institution had been under severe pressure since the close failures of two institutions with a similar profile in early March, Silicon Valley Bank and Signature, seized by regulators after massive withdrawals from customers worried about their viability.
As part of the transaction, First Republic Bank’s 84 offices in eight states will reopen as branches of JPMorgan Chase Bank, National Association on Monday, the FDIC says. in a press release. “All First Republic Bank depositors will become JPMorgan Chase Bank, National Association depositors and have full access to their deposits. »
Deposits will continue to be FDIC insured, and customers do not need to switch banking relationships to maintain deposit insurance coverage up to applicable limits.
Second biggest bankruptcy in American history
Based on the amount of assets (229 billion dollars as of April 13), it is the second largest bank failure in the history of the United States (excluding investment banks like Lehman Brothers) after that of Washington Mutual in September 2008.
Last week, the Californian bank announced that its net deposits had plunged by 41% in the first quarter of 2023 despite the 30 billion injected by 11 large establishments the previous month to prevent First Republic from going bankrupt like Silicon Valley Bank.
The action of First Republic then collapsed by almost 50% on April 25, dragging the entire sector down with it. “It was a little scary,” admitted Steve Sosnick, chief strategist at Interactive Brokers, observing the rout of the shares of other regional banks like PacWest (-8.92%) or Western Alliance (-5.65%) .
The bank failed to come up with a satisfactory rescue plan and when it confirmed last Monday that many customers withdrew deposits in the first quarter, more than $100 billion in total, its already struggling stock nose dive.
First Republic was only worth $ 654 million on the stock market on Friday at the close, while it was worth more than 20 billion at the start of the year and more than 40 billion at its peak in November 2021.