US banking titan JP Morgan to snap up most of First Republic

theguardian.com:

JP Morgan is to acquire most of the collapsing California bank First Republic, in a takeover brokered by regulators as the US races to contain a rash of bank failures with echoes of the 2008 global financial crisis.

After weekend talks brokered by regulators, the Federal Deposit Insurance Corporation (FDIC) confirmed that First Republic had collapsed and would be taken over by JP Morgan.

America’s largest bank will acquire “all of the deposits and substantially all of the assets” of First Republic, winning out over around five other banks that were reportedly in the running.

First Republic, based in San Francisco, is the third US lender to collapse this year, after Silicon Valley Bank (SVB) and Signature Bank, a sequence that has prompted concerns about contagion last experienced in the 2008 global financial crisis.

Growing anxiety about the potential for the malaise to spread, as customers pull deposits from any US lender perceived as weak, has forced the Federal Reserve to launch emergency measures to stabilise the markets.

A group of 11 Wall Street banks had pumped $30bn (£24bn) into First Republic in an attempt to avoid the third bank failure of 2023 but to no avail.

First Republic’s shares fell by more than 75% last week after it revealed customers had withdrawn $100bn of deposits in March.

The Federal Reserve has admitted in a report that it was slow to consider the strain on US banks from a sharp increase in interest rates, which has lowered the value of their financial assets even though it has increased their profitability.

The result has been panic and a flight of funds away from smaller lenders and towards safe haven financial institutions.

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