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JPMorgan (JPM) to Shut 21 First Republic Branches Post Takeover

JPMorgan JPM will likely close 21 First Republic Bank branches by the end of 2023 as it integrates the failed lender into its operations.

The locations represent one-fourth of First Republic’s 84 branches across eight states. A spokesperson for JPM said, “These locations have relatively low transaction volumes and are generally within a short drive from another First Republic office.”

Nearly 100 employees will be affected by the branch closures. They are likely to be offered six-month transition assignments, after which they will be eligible to apply for other roles at JPMorgan.

Notably, this May, JPMorgan took over failed First Republic. The company bought the bulk of First Republic’s $228 billion of assets (adding to its huge $3.7 trillion asset balance) and assumed deposits worth $92 billion by paying $10.6 billion.

First Republic’s collapse has been one of the largest since the 2008 financial crisis.

The San Francisco-based lender was seized by the Federal Deposit Insurance Corporation (“FDIC”) in May after almost two months of efforts to save the flagging institution. The nation’s biggest banks, including JPMorgan, tried to support the company by infusing $30 billion worth of deposits (in aggregate) to restore investors’ confidence in the banking system.

It is worth noting that FRC was the 14th largest bank in the country as of 2022-end. The bank’s demise, the second-biggest bank failure in history, seemed imminent following the revelation of $100 billion of deposit flight in the first quarter of 2023.

First Republic’s demise followed the collapse of two other major banks — Signature Bank and Silicon Valley Bank — in March and led to the banking industry turmoil amid fears of contagious effect on the U.S. regional banks. Signature Bank and Silicon Valley Bank were seized by the FDIC and then sold to New York Community Bancorp, Inc. NYCB and First Citizens BancShares, Inc. FCNCA, respectively.

NYCB, through its bank subsidiary, Flagstar Bank, acquired $38 billion in assets and assumed $36 billion of liabilities of Signature Bank, while not buying any digital asset banking, crypto-related assets or the fund banking business. FCNCA assumed Silicon Valley Bank’s assets worth $110 billion, deposits worth $56 billion and loans worth $72 billion.

Our Take

Over the past two years, JPMorgan has undertaken several on-bolt acquisitions that supported its fee income base, and improved market share across several products and services. The company was not permitted to acquire other banks, as it would cause its deposit balance to exceed 10% of U.S. bank deposits, which is not allowed.

But given the special situation, JPM won the bid to acquire First Republic, which included several other large industry players. The deal presents a unique opportunity to support “the U.S. financial system through its significant strength and execution capabilities.”

Over the past six months, shares of JPMorgan have rallied 4.7% against an 11.7% decline of the industry it belongs to.

 

Zacks Investment Research
Zacks Investment Research


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At present, JPM carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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