Last week, First Republic Bank (NYSE: FRC) lost 70% of its value, and since the bank debacle began in early March, the shares dropped 97%. The bank’s stock lost more than 43% on Friday and ceased to exist Monday morning after state regulators closed the bank and the FDIC was appointed the receiver.
The federal agency then entered a purchase and assumption agreement with JPMorgan Chase & Co. (NYSE: JPM) to assume First Republic’s deposits and to purchase “substantially all” of the failed bank’s assets. First Republic’s 84 branch offices will open as scheduled Monday morning as branches of JPMorgan, and all depositors will become JPMorgan depositors and “will have full access to all of their deposits.”
While JPMorgan, the country’s largest bank, is ordinarily barred from acquiring other banks because it already controls more than 10% of U.S. deposits, the cap was waived in this instance. The bank has estimated that its acquisition of First Republic would add about $500 million to its annual profit. JPMorgan has reported net income of more than $42 billion over the past four quarters.
JPMorgan CEO Jamie Dimon commented, “This acquisition modestly benefits our company overall, it is accretive to shareholders, it helps further advance our wealth strategy, and it is complementary to our existing franchise.” The big bank is not acquiring First Republic’s preferred stock nor its corporate debt.
The FDIC estimates the final cost to the agency’s deposit insurance fund will be about $13 billion.
Were it not for First Republic’s failure (the second largest bank failure in U.S. history), Monday morning’s business news would be led by the announcement of U.K. chipmakers Arm’s confidential filing with the U.S. Securities and Exchange Commission for a proposed initial public offering of American depositary shares. The size and pricing of the offering have not been determined yet.
In July of 2020, Nvidia Corp. (NASDAQ: NVDA) offered to buy Arm from Masasashi Son’s Softbank in a cash and stock deal valued at around $40 billion. The deal was scuppered when rival chipmakers, like Qualcomm Corp. (NASDAQ: QCOM), opposed the deal and regulators indicated that the sale to Nvidia would not be approved. In February of 2022, Arm and Nvidia announced that the acquisition was off.
Softbank acquired Arm (an acronym for Advanced RISC Machine, and RISC is an acronym for reduced instruction set computing) in 2016 for $32 billion. While Arm’s technology is at the heart of Apple Inc.’s (NASDAQ: AAPL) iPhone, Apple’s own CPUs, and literally thousands of other chips and devices, Arm does not fabricate semiconductors. It designs the circuitry for a chip and then licenses the designs to third parties. The company was founded in 1983, and Ars Technica had an article last year summarizing the company’s technology and history.
Originally published at 24/7 Wall St.
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