84 FRB branches in 8 states to reopen as JPMorgan Bank branches on Monday

The FDIC said early Monday that California regulators had shut down First Republic and appointed it as receiver. JPMorgan Chase will “take over all deposits and substantially all assets”. First Republic BankIt said in a statement.

84 First Republic Bank branches in eight states will reopen on Monday as JPMorgan Chase bank branches.

Regulators were working to find a way forward before US stock markets opened on Monday. San Francisco-based First Republic has been struggling since the collapse of Silicon Valley Bank and Signature Bank in early March. They further fueled concerns that the bank may not survive as an independent institution for much longer.

Regulators spent the weekend searching for a solution to First Republic Bank’s crisis, hoping to find a way before US stock markets open on Monday.

San Francisco-based First Republic has struggled since the collapse of Silicon Valley Bank and Signature Bank in early March, as investors and depositors became increasingly concerned that the bank might not survive as an independent entity. The bank’s stock closed at $3.51 on Friday, a fraction of the roughly $170 the stock traded at a year ago. It declined further in after-hours trading.

World markets have been periodically shaken by concerns of turmoil in the banking industry since the collapse of Silicon Valley Bank. Markets in many parts of the world remained closed on Monday on account of May 1 holiday. Asia’s two markets that opened in Tokyo and Sydney rose on Monday, while US futures were little changed, with the S&P 500 contracting by about 0.1%.

First Republic has been viewed as the bank most likely to collapse due to its exposure to uninsured deposits and low-interest rate loans.

Former Goldman Sachs chairman Gary Cohn, who served as President Donald Trump’s top economic adviser, told CBS News’ “Face the Nation” on Sunday that the Federal Deposit Insurance Corporation would “rather than sell the bank piecemeal in its entirety.” Would love to sell from.”

“The most likely outcome will be that the FDIC will seize control and then simultaneously resell the asset to a successful bidder,” Kohn said.

Kohn said he believes it will be a “much faster process” than what happened with Silicon Valley Bank.

First Republic reported total assets of $233 billion as of March 31. At the end of last year, the Federal Reserve ranked First Republic 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 customers – mostly the rich and powerful – rarely default on their loans. The 72-branch bank has made most of its wealth by making low-cost loans to the wealthy, which reportedly includes Meta Platforms CEO Mark Zuckerberg.

Fueled by deposits from wealthy individuals, First Republic’s net worth more than doubled to $102 billion at the end of the first quarter of 2019, when its full-time workforce stood at 4,600.

But the vast majority of deposits at Silicon Valley and Signature Banks such as First Republic were uninsured – above the $250,000 limit set by the FDIC. And it worried analysts and investors. If First Republic fails, its depositors may not get all their money back.

Those apprehensions were clarified in the bank’s most recent quarterly results. The bank said that depositors pulled out more than $100 billion from the bank during the April crisis. San Francisco-based First Republic said it was only able to stem the bleeding after a group of big banks stepped in to rescue it with $30 billion in uninsured deposits.

Now First Republic needs a major fix.

“Getting the bank into the hands of one big bank is the best possible economic outcome,” said Steven Kelly, a researcher with the Yale School of Management Program on financial stability. Profitable bank for its entire history – but its business model hasn’t been stable. It needs a huge bank balance sheet behind it.”

Kelly added that other options, such as continued government control or trying to survive on its own, would continue to erode its value along with credit and economic growth.

“A successful absorption into a large bank would provide an appropriate, stable home for the firm to continue providing its value proposition to the economy,” Kelly said.

Since the crisis, the First Republic has been looking for a way to quickly transform itself. The bank planned to sell unprofitable properties, including low-interest mortgages offered to wealthy customers. It also announced plans to lay off up to a quarter of its workforce, down to about 7,200 employees by the end of 2022.

But investors are still skeptical. Bank officials have not taken any questions from investors or analysts since the bank reported its results, causing the stock to sink further.

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