JPMorgan Takes Over First Republic From FDIC For $10.6 Billion; Acute Stress in Banking is Over, Says Jamie Dimon

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JPMorgan Chase has entered into a deal to buy the crisis-hit San Francisco bank First Republic. As per the deal, JPMorgan will pay $10.6 billion to the US Federal Deposit Insurance Corp (FDIC) for most of the assets of the failed bank.

After the mega bank sealed the deal in an auction, CEO Jamie Dimon said the deal concludes one of the most 'excruciating periods of panic' for the banking system. "This part of the crisis is over," Dimon said in a call with analysts on Monday.

Dimon said the acquisition of First Republic by JPMorgan will increase the confidence in the financial industry. "This was the last of the big banks that was teetering ... With this behind the industry it should lead to additional confidence that...the acute stress in the system is behind us," he told Yahoo Finance.

h: JPMorgan Chase Tower in Houston.
h: JPMorgan Chase Tower in Houston. Wikimedia Commons

On Sunday, Yahoo Finance had reported that multiple large banks in the US had shown interest in taking over the crisis-hit First Republic after it gets into the Federal Deposit Insurance Corporation's receivership. According to the report, JPMorgan Chase, Bank of America and PNC had shown interest in participating in the bid for the First Republic. The FDIC had placed a Sunday noon deadline for the submission of the bids.

Following the deal, First Republic's shares tumbled more than 40 percent on Monday, which means the bank's shares have lost more than 97 percent of the value this year. JPMorgan shares rose 2.7 percent after the announcement of the deal.

JPMorgan Chase was among the banks that were part of a $30 billion rescue deal for First Republic in March. While JPMorgan and the Bank of America, along with Citigroup and Wells Fargo committed $5 billion each, other banks like Goldman Sachs, Morgan Stanley, US Bancorp, Truist, PNC, State Street and Bank of New York Mellon chipped in with amounts ranging from $1 to $2 billion each.

First Republic Bank
First Republic Bank Wikimedia Commons

Troubles at First Republic

Troubles at California-based First Republic Bank started in the aftermath of the bank run on Silicon Valley Bank that led to its eventual collapse and takeover by the regulators. As the bank came under pressure, its shares lost more than a third of their value, as investors were spooked by the failure of SVB and Signature Bank.

Another Plunge

Shares of crisis-hit bank First Republic plunged again on Friday after reports said there was a dim outlook for a timely rescue. Trading was halted several times even as the stock nosedived as much as 40 percent amid reports that the bank could be taken into receivership by the Federal Deposit Insurance Corporation. Friday's plunge means the stock has lost more than 90 percent after reports in March brought out liquidity crisis at the bank. The stock is trading at a little over $3 on Friday, which is an all-time low.

In the aftermath of the worsening crisis, some analysts have said First Republic is unlikely to survive. It is "unlikely" the bank will survive said analysts Timothy Coffey of Janney Montgomery Scott said, according to Yahoo Finance. The analysts said this when they were asked about a CNBC report that First Republic (FRC) is likely headed for FDIC receivership, the outlet reported.