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JPMorgan (JPM) Completes 14 First Republic Branch Closures

JPMorgan Chase JPM has shut down 14 First Republic Bank branches in California. With this, the Wall Street giant completes its initial plans to trim the failed bank’s branch network following its takeover this May.

Of the total branches that have been shut, half were in San Francisco County and the rest were spread across six other counties in California.

JPMorgan had initially planned to shut down 21 First Republic branches by the end of 2023. With the latest closures, the target has been met.

The shutdowns represent one-quarter of the total 84 branches that First Republic operated at the end of April 2023.

Earlier this year, JPM said that the 21 branches selected for closure had “relatively low transaction volumes and are generally within a short drive from another First Republic office.”

While the remaining 63 branches are likely to be rebranded as Chase branches, more branch closures may take place.

Jennifer Piepszak, the co-CEO of consumer and community banking, had said during JPM’s May investor day that the remaining First Republic branches will either stay open because they are in better locations than nearby Chase branches or they will be closed due to their proximity to an existing Chase office.

Details of the First Republic Takeover

On May 1, JPM acquired failed First Republic Bank to become an even bigger financial behemoth. JPM bought the bulk of First Republic’s $228 billion of assets and assumed deposits worth $92 billion by paying $10.6 billion. The company did not acquire any of the First Republic’s corporate debt or preferred stock.

At the time of the acquisition, JPMorgan expected the transaction to generate more than $500 million of “incremental net income” annually.

Also, the financial giant expected the deal to result in increased penetration within the high-net-worth clients.

Jamie Dimon, the chairman and CEO of JPMorgan, said, “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.”

After almost two months of efforts to save the flagging institution, the Federal Deposit Insurance Corporation (“FDIC”) seized First Republic in May. The nation’s biggest banks, including JPMorgan, had tried to support the San Francisco-based lender by infusing $30 billion worth of deposits (in aggregate). Despite the infusion, deposits continued to exit the company and by the end of April, there were only a few options left to save it.

The failure of First Republic Bank followed the collapse of two other major banks — Signature Bank and Silicon Valley Bank — and led to the regional banking industry turmoil in the United States. 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.

Conclusion

Over the past few years, JPMorgan has undertaken several on-bolt acquisitions that have supported its fee income base and improved market share across several products and services.

Also, the bank is expanding its footprint in new regions. In 2018, JPM announced plans to enter 25 new markets by opening 400 new branches. The company has made substantial progress on this front, with a presence in 48 of 50 U.S. states.

In addition to enhancing market share, the strategy will help the bank grab cross-selling opportunities by increasing its presence in the card and auto loan sectors.

Over the past six months, shares of JPMorgan have rallied 13.4% compared with the industry’s rise of 2.7%.

 

Zacks Investment Research
Zacks Investment Research


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Currently, 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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