First Republic Bank bought by JPMorgan & Chase
The Failed First Republic Bank has been sold by US Regulators to JPMorgan & Chase. First Republic Bank also had same issues like the Silicon Valley Bank whose assets were battered by rise in the interest rates. The same First Republic Bank received $30 Billion deposits from the 11 of the country’s largest banks but that has not prevented it going down in the current crisis!
First Republic Bank is the 2nd largest US bank to collapse after Washington Mutual Fund which had a much larger asset base during the financial crisis of 2008. This is the one of the 3rd banks to fail after the Silicon Valley Bank and Signature Bank collapses earlier this year. These collapses has already stoked fears that similar regional banks might collapse due to raise in the interest rates started by Fed last year.
As part of the current deal, FDIC might need to pay around $13 Billion to cover the losses incurred by First Republic Bank and also 84 branches First Republic branches will open as JPMorgan branches from Monday. The current crises was more precipitated by bank run on the customer deposits as investors lost confidence in the bank after the failure at Silicon Valley Bank and Signature Control Bank. This led to affluent customers moving their money from First Republic to other banks and this led to nearly $102 billion erosion of its $176 billion deposits. And First Republic had nearly borrowed $92 Billion from Govt agencies and others to give the money back to it’s customers. This has led to hugelosses which lead to it’s failure in the current crisis!
As soon as the earnings report was out last Thursday, investors dumped the First Republic shares which lead to more losses as the Government takeover was nearly imminent!