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| First Republic: JP Morgan snaps up major US bank | |
| (about 4 hours later) | |
| JP Morgan Chase has taken over the troubled US bank First Republic in a deal brokered by regulators. | |
| The Federal Deposit Insurance Corporation (FDIC) confirmed in a statement that First Republic Bank had collapsed on Monday. | The Federal Deposit Insurance Corporation (FDIC) confirmed in a statement that First Republic Bank had collapsed on Monday. |
| Investment banking giant JP Morgan will take on all of the deposits and the majority of First Republic's assets. | Investment banking giant JP Morgan will take on all of the deposits and the majority of First Republic's assets. |
| First Republic is the third US bank to fail in recent months, which has prompted fears of wider banking crisis. | |
| The San Francisco-based lender's shares fell by more than 75% last week after it admitted that customers had withdrawn $100bn (£79.6bn) of deposits in March. | The San Francisco-based lender's shares fell by more than 75% last week after it admitted that customers had withdrawn $100bn (£79.6bn) of deposits in March. |
| It follows on from the collapse of Silicon Valley Bank (SVB) in March and the demise of another US lender, Signature Bank. | It follows on from the collapse of Silicon Valley Bank (SVB) in March and the demise of another US lender, Signature Bank. |
| Is this a banking crisis - how worried should I be? | Is this a banking crisis - how worried should I be? |
| In a scramble to come up with a rescue package for First Republic, US officials were understood to have contacted six banks, according to news agency AFP. | In a scramble to come up with a rescue package for First Republic, US officials were understood to have contacted six banks, according to news agency AFP. |
| The failed bank's 84 offices in eight states will reopen as branches of JPMorgan Chase Bank from Monday after regulators seized control and immediately sold to the Wall Street institution. | The failed bank's 84 offices in eight states will reopen as branches of JPMorgan Chase Bank from Monday after regulators seized control and immediately sold to the Wall Street institution. |
| Jamie Dimon, chief executive of JP Morgan Chase, said the government had "invited" the banking giant, along with others, to "step up, and we did". | |
| 'A deep breath' | |
| The firm will pay $10.6bn to the FDIC for the bank - which had commanded a market value of more than $20bn at the start of the year. | |
| Mr Dimon said he expected the deal marked the end of the panic that emerged last month, noting that few other banks were at risk of the massive customer flight seen at First Republic, SVB and Signature. | |
| "This part of the crisis is over," he said. "Down the road - rates going up, recession, real estate - that's a whole different issue. For now, we should take a deep breath." | |
| Jamie Dimon told reporters on Monday: 'Hopefully this will help stabilize everything.' | |
| Founded in 1985, First Republic was a mid-sized US lender, similar to Silicon Valley Bank. | |
| It was known for catering to wealthy clients - many of whom had more money in their accounts than the $250,000 guaranteed by the government if the bank collapsed and withdrew funds amid last month's panic. | |
| Executives said they expected the acquisition would "modestly benefit" JP Morgan. They said they hoped they would be able to keep the First Republic's customers, boosting their wealth management business. | |
| JP Morgan will take on $173bn of loans, about $30bn of securities and $92bn of deposits from First Republic, it said in a statement. | |
| As part of the agreement, the FDIC will share losses on some loans with the JP Morgan. It has estimated that its insurance fund would take a hit of about $13bn in the deal. | |
| A spokesperson for the US Treasury Department said it was "encouraged" that the deal was carried out in a way "that protected all depositors". | |
| "The banking system remains sound and resilient, and Americans should feel confident in the safety of their deposits and the ability of the banking system to fulfil its essential function of providing credit to businesses and families," the spokesperson added. | |
| A deposit flight from some lenders in recent months has forced the Federal Reserve, the US central bank, to step in with emergency measures to stabilise financial markets. | A deposit flight from some lenders in recent months has forced the Federal Reserve, the US central bank, to step in with emergency measures to stabilise financial markets. |
| When Silicon Valley Bank and Signature collapsed, the FDIC said it would guarantee all deposits to prevent a rush of people trying to get their money out, which is known as a run on a bank. | |
| In March, a group of America's biggest banks, including JP Morgan, stepped forward to pump $30bn into First Republic in a bid to stabilise the business, but the efforts proved futile. | |
| Mr Dimon said that deal had bought time, allowing regulators to avoid having to guarantee all the deposits of First Republic's customers as well. | |
| US bank makes last ditch bid to find rescuer | US bank makes last ditch bid to find rescuer |
| Future of US bank in doubt as investors flee | Future of US bank in doubt as investors flee |
| As central banks around the world raised interest rates aggressively to dampen the rate of price rises, known as inflation, some lenders have come under pressure. | As central banks around the world raised interest rates aggressively to dampen the rate of price rises, known as inflation, some lenders have come under pressure. |
| Increased interest rates have hurt the values of the large portfolios of bonds bought by banks when rates were lower. | Increased interest rates have hurt the values of the large portfolios of bonds bought by banks when rates were lower. |
| In Europe, banking giant Credit Suisse was bought by rival UBS in March, in a deal orchestrated by Swiss authorities. | |
| But the current situation doesn't appear to be a repeat of the 2008 financial crisis as there isn't the same system-wide problem, when banks around the world suddenly found they were exposed to rotten investments in the US housing market. | But the current situation doesn't appear to be a repeat of the 2008 financial crisis as there isn't the same system-wide problem, when banks around the world suddenly found they were exposed to rotten investments in the US housing market. |
| That led to enormous government bailouts and a global economic recession. | That led to enormous government bailouts and a global economic recession. |
| Related Topics | Related Topics |
| Companies | Companies |
| Banking | Banking |
| Credit Suisse | Credit Suisse |