First Republic Stock Halts — Before Becoming Fourth Bank to Fail in 2023 as JPMorgan Steps In
Key takeaways
- First Republic has been bought by JPMorgan for $10.6 billion in a distress purchase
- The embattled regional bank had been teetering on the edge after Q1 earnings revealed a 40% drop in deposits
- First Republic shares have now been delisted from the NYSE
It’s official: First Republic Bank is no more. After some ground-shakingly bad Q1 earnings, the beleaguered regional bank has finally folded. Banking giant JPMorgan, which led the original $30 billion rescue package for First Republic, has purchased its assets. Here’s the latest on what happened and how.
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What went down
Early Monday, the Federal Deposit Insurance Corp (FDIC) announced JPMorgan would take over all of First Republic’s deposits and most of its assets in a distress sale. JPMorgan will protect all insured and uninsured deposits, so no customers are set to lose their money.
First Republic’s shares were halted on Monday at the news, with the New York Stock Exchange (NYSE) citing regulatory concerns as the reason. The stock was already down 34% before halting.
It’s the third major bank failure this year, which was sparked by the dramatic fall of Silicon Valley Bank and Signature Bank before spreading to Europe, where Credit Suisse also collapsed. JPMorgan CEO Jamie Dimon was reassuring: “This part of the crisis is over. For now, let’s take a deep breath.”
What happens next
It’s another dramatic collapse for the banking sector, but the writing was on the wall for First Republic after its dismal Q1 earnings report. As for the stock price? It’s worth zilch. Zip. Nada. So the NYSE has delisted First Republic Shares as of Tuesday. JPMorgan, who’s been flying high from a stellar earnings season, saw its share price rise 2.4% after announcing the rescue deal.
But the purchase doesn’t seem enough to calm the markets. The S&P 500 is down 1.7% and the Nasdaq fell 1.5%, with most bank shares down on Tuesday. Regional banks have suffered even more, with PacWest shares halted at one point and down 27%. Western Alliance is down 20%.
It’s interesting timing for the Fed, who have just entered their cloistered May meeting to decide on interest rates. The data was leaning toward a quarter-point hike, but they could reconsider given First Republic is the third US bank to fail in as many months.
The bottom line
It’s not been a happy day for the banking sector, which has already tried hard to prop up the ailing sector after March’s banking crisis. Let’s hope there aren’t any more halted stocks in the near future, but if a recession is on the horizon, sadly those odds increase.
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