Shares of JPMorgan Chase & Co. JPM climbed over 3% in premarket trading after the big bank prevailed in the bidding war to lap up the assets and deposits of the now-collapsed First Republic Bank FRC.
San Francisco-based First Republic has been shuttered and placed under FDIC's receivership.
Winning The Bidding War: About half a dozen banks tabled bids for First Republic after FDIC solicited interest from among banks, reports said over the weekend. It was speculated that PNC Financial Services Group, Inc. PNC could emerge victorious as it was not constrained by the upper ceiling norms for deposits, unlike the big banks.
JPMorgan has already provided First Republic with uninsured deposits in mid-March in a bid to ease the liquidity crunch. This was part of a $30 billion combined contribution made by 11 banks.
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While confirming the purchase, JPMorgan said it is supporting the U.S. financial system through its significant strength and execution capabilities.
"Our government invited us and others to step up, and we did," said Jamie Dimon, Chairman and CEO of JPMorgan. The company has not assumed the smaller peer's corporate debt or preferred stock.
Net Positive Deal: Detailing the financial impact of the deal, the company said it expects to recognize an upfront, one-time, post-tax gain of about $2.6 billion. This does not reflect the nearly $2 billion of post-tax restructuring costs expected over the next 18 months, it added.
The transaction is expected to be modestly accretive to earnings per share and generate more than $500 million of incremental net income per year, excluding one-time gains and restructuring costs.
The FDIC and JPMorgan have executed a loss-sharing agreement, covering single-family residential mortgage loans and commercial loans, as well as $50 billion of five-year, fixed-term financing.
In premarket trading on Monday, JPMorgan shares rose 3.02% to $142.41, according to Benzinga Pro data.
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