First Republic is the third midsize bank to fail in two months.
following the failure of Silicon Valley and Signature Bank. Unlike bank runs throughout history, First Republic’s demise was fueled by the speed of social media and digital withdrawals that can be made in seconds from a cell phone.
San Francisco-based First Republic said that it was only able to stanch the bleeding after a group of large banksFirst Republic had been looking for a way to quickly turn itself around. The bank planned to sell off unprofitable assets, including the low interest mortgages that it provided to wealthy clients. It also announced plans to lay off up to a quarter of its workforce, which totaled about 7,200 employees in late 2022.
Investors were skeptical, and the devastating quarterly report sent them running for the exits. First Republic shares fell 75% last week and closed Friday at $3.51. Any remaining shareholders are likely to get wiped out. The shares traded at $115 on March 8, right before Silicon Valley Bank failed. The Fed and FDIC, which regulate the banking industry along with the Office of Comptroller of the Currency, could face renewed criticism over their handling of First Republic. Both acknowledged Friday in separate reports thatFor Dimon and JPMorgan, there may be a sense of déjà vu: Back in 2008, Dimon was the go-to banker for Washington to find private solutions for that banking crisis and JPMorgan acquired both Bear Stearns and Washington Mutual.
In a statement, JPMorgan portrayed the First Republic deal as beneficial both to the financial system and the company. As part of the agreement, the FDIC will share losses with JPMorgan on First Republic’s loans. JPMorgan expects the addition of First Republic to add $500 million to its net income per year, although it expects to incur $2 billion in costs integrating First Republic into its operations over the next 18 months. .
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