ISRAEL AT WAR - DAY 142

search

US seizes assets of First Republic Bank, third to collapse in 2 months

JPMorgan Chase acquires bank’s assets, set to reopen branches under its name, after bank failed to recover from $100 billion loss in year’s first quarter

File: A pedestrian walks past a First Republic Bank in San Francisco on April 26, 2023. (AP Photo/Jeff Chiu)
File: A pedestrian walks past a First Republic Bank in San Francisco on April 26, 2023. (AP Photo/Jeff Chiu)

NEW YORK (AP) — US regulators seized troubled First Republic Bank and sold all of its deposits and most of its assets to JPMorgan Chase Bank in a bid to head off further banking turmoil in the United States.

San Francisco-based First Republic is the third midsize bank to fail in two months. It has struggled since the collapse of Silicon Valley Bank and Signature Bank and investors and depositors had grown increasingly worried it might not survive because of its high amount of uninsured deposits and exposure to low interest rate loans.

The Federal Deposit Insurance Corporation said early Monday that First Republic Bank’s 84 branches in eight states will reopen Monday as branches of JPMorgan Chase Bank.

Regulators worked through the weekend to find a way forward before US stock markets opened. Markets in many parts of the world were closed for May 1 holidays Monday. The two markets in Asia that were open, in Tokyo and Sydney, rose.

As of April 13, First Republic had approximately $229 billion in total assets and $104 billion in total deposits, the FDIC said. At the end of last year, the Federal Reserve ranked it 14th in size among US commercial banks.

Before Silicon Valley Bank failed, First Republic had a banking franchise that was the envy of most of the industry. Its clients — mostly the rich and powerful — rarely defaulted on their loans. The bank has made much of its money making low-cost loans to the wealthy, which reportedly included Meta Platforms CEO Mark Zuckerberg.

File: First Republic Bank signs and logos are displayed on a branch in Wellesley, Massachusetts, April 26, 2023. (AP Photo/Steven Senne)

Flush with deposits from the well-heeled, First Republic saw total assets more than double from $102 billion at the end of 2019’s first quarter, when its full-time workforce was 4,600.

But the vast majority of its deposits, like those in Silicon Valley and Signature Bank, were uninsured — that is, above the $250,000 limit set by the FDIC. And that worried analysts and investors. If First Republic were to fail, its depositors might not get all their money back.

Those fears were crystalized in the bank’s recent quarterly results. The bank said depositors pulled more than $100 billion out of the bank during April’s crisis. San Francisco-based First Republic said that it was only able to stanch the bleeding after a group of large banks stepped in to save it with $30 billion in uninsured deposits.

Since the crisis, First Republic has been looking for a way to quickly turn itself around. The bank planned to sell off unprofitable assets, including the low interest mortgages that it provided to wealthy clients. It also announced plans to lay off up to a quarter of its workforce, which totaled about 7,200 employees in late 2022.

Investors remained skeptical. The bank’s executives have taken no questions from investors or analysts since the bank reported its results, causing First Republic’s stock to sink further.

And it’s hard to profitably restructure a balance sheet when a firm has to sell off assets quickly and has fewer bankers to find opportunities for the bank to invest in. It took years for banks like Citigroup and Bank of America to return to profitability after the global financial crisis 15 years ago, and those banks had the benefit of a government-aided backstop to keep them going.

read more:
Never miss breaking news on Israel
Get notifications to stay updated
You're subscribed
image
Register for free
and continue reading
Registering also lets you comment on articles and helps us improve your experience. It takes just a few seconds.
Already registered? Enter your email to sign in.
Please use the following structure: example@domain.com
Or Continue with
By registering you agree to the terms and conditions. Once registered, you’ll receive our Daily Edition email for free.
Register to continue
Or Continue with
Log in to continue
Sign in or Register
Or Continue with
check your email
Check your email
We sent an email to you at .
It has a link that will sign you in.