The First Republic Bank (NYSE: FRC) stock price plunged 45.9% after the Federal Deposit Insurance Corporation (FDIC) took over the bank and immediately sold it to JPMorgan, making the country’s largest bank by asset base much bigger.
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In a statement hours before the US markets opened, the FDIC said that 84 First Republic branches in 8 states would reopen as JPMorgan branches on Monday as US regulators worked through the weekend to save the bank that witnessed over $100 billion in outflows during Q1 2023.
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The bank’s stock plunged afresh last week after it revealed the scale of outflows it had incurred following the failures of Signature Bank and Silicon Valley Bank in March. However, today’s transaction had a muted impact on US banking stocks simply because First Republic’s problems are seen as an extension of the March crisis rather than a new crisis.
Moreover, First Republic received a $30 billion bailout from 11 US banks during the collapse of Silicon Valley Bank and Signature Bank. Still, the bank never regained solid footing amid customer jitters that it, too, could go under just like its regional peers.
In addition, some analysts have warned that JPMorgan’s takeover of First Republic could face some political scrutiny in Washington, especially from conservative Democrats, who may feel that the bank is too big and may pose a systemic risk to the US banking system if it was ever in trouble.
Jamie Dimon, Chairman and CEO of JPMorgan Chase, said: “Our government invited us and others to step up, and we did. Our financial strength, capabilities and business model allowed us to develop a bid to execute the transaction in a way to minimize costs to the Deposit Insurance Fund.”
Most analysts view JPMorgan’s takeover of First Republic Bank as marking an end to the banking crisis that unfolded in the USA from February to March. The crisis prompted US regulators, including the FDIC and Federal Reserve, to take measures to protect the industry from a crisis of confidence and a potential massive bank run.
*This is not investment advice.
First Republic Bank (FRC) stock price.
The First Republic Bank (FRC) stock price was down 45.87% to trade at $1.90, adding to Friday’s 43.30% decline.
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