Jamie Dimon says JPMorgan rescued First Republic because the government asked his bank 'to step up, and we did'
- Jamie Dimon says JPMorgan bought First Republic after the US government asked it to "step up."
- The bank picked up most of First Republic's assets, including about $92 billion in deposits.
Jamie Dimon said JPMorgan's acquisition of First Republic came after the US government asked the bank to "step up" in a deal that will "modestly" benefit America's biggest bank.
JPMorgan acquired a substantial majority of First Republic's assets after the regional lender was seized by the Federal Deposit Insurance Corporation (FDIC).
The bank's stock price jumped as much as 4.2% in pre-market trading following the announcement early Monday, with JPMorgan saying it would pick up $92 billion in customer deposits.
"Our government invited us and others to step up, and we did," JPMorgan CEO Dimon said in a press release.
"Our financial strength, capabilities and business model allowed us to develop a bid to execute the transaction in a way to minimize costs to the Deposit Insurance Fund.
"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."
First Republic was caught up by the collapse of Silicon Valley Bank (SVB) in early March as investors cast doubt on its loan book, wiping out most of the bank's stock market value.
While a $70 billion credit line from the likes of JPMorgan and the Federal Reserve kept the wolves from the door, last week's first-quarter earnings release revealed the extent of the run on the San Francisco-based bank.
Deposits fell 41% in the first three months of 2023 to $104.5 billion, sending its share price plummeting further. With no white knight riding to its rescue, First Republic fell into FDIC receivership at a cost of $13 billion to the regulator.
JPMorgan was reported to be in contention with competitor PNC Financial Group to take control of First Republic following its collapse, after being heavily involved in attempts to help rescue the ailing lender.
In addition to most of First Republic's deposits, JPMorgan will pick up about $173 billion in loans and about $30 million of securities. It said it won't assume First Republic's corporate debt or preferred stock.
JPMorgan said it will record a post-tax gain of approximately $2.6 billion, which doesn't reflect a $2 billion restructuring bill anticipated over the next 18 months.
On a private call with journalists heard by Insider, Dimon was quizzed about whether JPMorgan was now considered too big to fail following the acquisition of First Republic, and whether the acquisition might cause discontent.
"We bank countries, we bank the IMF, we bank the World Bank," Dimon responded as he talked up the capabilities JPMorgan enjoyed thanks to its size.
"You need large successful banks, and anyone who thinks it would be good for the United States not to have that should call me directly."
First Republic's shares slumped more than 40% to $2.10 in pre-market trading, while JPMorgan rose 2.5% to $141.70.
Dimon will host a call with reporters at 8 a.m. ET to give more details of the acquisition.