JPMorgan Chase & Co (JPM.N) will buy most of First Republic Bank's (FRC.N) assets in a last-ditch rescue led by U.S. regulators, marking the third major U.S. institution to fail in two months.
The deal, announced early on Monday as regulators seized First Republic, will see the largest U.S. bank acquire $173 billion of loans, $30 billion of securities and $92 billion of deposits of the failed lender.
Highlights from a presentation to investors by JPMorgan:
Key terms:
* JPMorgan Chase will pay $10.6 billion to the Federal Deposit Insurance Corp (FDIC)
* Will not assume First Republic's corporate debt or preferred stock
* FDIC to provide loss share agreements with respect to most acquired loans
* JPMorgan will repay $25 billion of deposits large U.S. banks made in First Republic in March and eliminate the $5 billion deposit it made on consolidation
* Deal has received all regulatory approvals and has closed
Transaction assumptions:
* JPMorgan expects one-time gain of $2.6 billion post-tax at closing, not including expected restructuring costs of $2 billion over the course of 2023 and 2024
* Estimated to add roughly $500 million to net income and be accretive to tangible book value per share
* Says FDIC loss share agreements reduce risk weighting on covered loans
Plan for integration:
* First Republic branches and offices will open as normal
* Plans to convert certain First Republic branches into new J.P. Morgan wealth centers
* Failed lender's loan portfolios will be transitioned to JPMorgan Chase's business segments and technology systems
* First Republic's private wealth management platform will become part of J.P. Morgan Advisors
Due diligence:
* JPMorgan says over 800 employees participated in the due diligence
* Conducted comprehensive data room review including loan and deposit tapes
* JPMorgan says loan portfolio marks supported by due diligence process
