JPMorgan Chase & Co (JPM.N) said on Monday it will buy most of First Republic Bank (FRC.N) after U.S. regulators seized the troubled bank over the weekend, marking the third major U.S. lender to fail in two months.
As part of the deal, JPMorgan will make a payment of $10.6 billion to the U.S. Federal Deposit Insurance Corp (FDIC) as part of the deal to buy most of the San Francisco-based lender’s assets.
The bank has also entered into a loss-share agreement with the FDIC on single family, residential and commercial loans it bought but will not take First Republic Bank’s corporate debt or preferred stock.
The deal, which came after a weekend auction, allows for an orderly failure of First Republic and avoids the need for regulators to have to insure all deposits, as they had to do when two other banks failed last month. It also makes the largest U.S. bank even bigger.
First Republic came under intense pressure after disclosing last week that it had suffered more than $100 billion in outflows in the first quarter and was exploring options.
That also renewed stress on the banking sector, which was reeling from the closure of Silicon Valley Bank and Signature Bank in March, while Swiss lender Credit Suisse (CSGN.S) was bought by rival UBS (UBSG.S) in a state-engineered takeover.
First Republic Bank shares tumbled 43.3% in premarket trading before being halted. The stock has lost 97% of its value this year. JP Morgan shares rose 2.7%.
