FirstFT: The second-biggest bank failure in US history

After days of speculation about the future of First Republic, and a frantic weekend of negotiations, it was announced today that the US bank was to close and its $93.5bn deposits and most of its assets to be sold. JPMorgan Chase, which had led an effort to save First Republic a month ago, is to acquire most of the embattled lender.

The deal means all depositors, including those above the $250,000 insurance limit, will retain access to their money when the bank opens this morning. However, the Federal Deposit Insurance Corporation estimated that losses to its insurance fund would be about $13bn.

First Republic’s assets were badly hit by interest rate rises and had been struggling for two months. Its shares have lost more than 97 per cent of their value this year, while the bank revealed last week that it had suffered more than $100bn in deposit outflows in the first quarter. Concerns about regional banks had risen after the collapse of Silicon Valley Bank.

JPMorgan had tried to stabilise the San Francisco-based lender, bringing together a group of 11 banks that put in $30bn in deposits. With that lifeline failing, First Republic has become the second-largest bank failure in US history, after Washington Mutual in 2008.

“Our government invited us and others to step up, and we did,” said JPMorgan’s chief executive Jamie Dimon. “Our financial strength, capabilities and business model allowed us to develop a bid to execute the transaction in a way to minimise costs to the deposit insurance fund.”

Here’s what else I’m keeping tabs on today:

  • May Day: Financial markets in the UK, France, Germany, South Africa, Switzerland and other countries are closed today.

  • White House: US president Joe Biden welcomes his Philippine counterpart Ferdinand “Bongbong” Marcos Jr for a bilateral meeting after the two countries recently held their largest joint military drills in 30 years.

Five more top stories

1. Exclusive: Deutsche Bank is planning to expand its investment bank advisory team significantly and has already recruited 26 managing directors in the past two months, with several coming from collapsed rival Credit Suisse. Read the full story.

2. Brazil’s Congress is poised to vote on contentious legislation to curb the spread of “fake news”. The measure is being pushed through at speed by the government led by President Luiz Inácio Lula da Silva, but critics are unhappy. Find out why.

3. Jack Ma is taking up a teaching position in Japan from today, as the charismatic Chinese entrepreneur begins to reassume a public profile after largely disappearing from view during Beijing’s crackdown on tech. Here’s what he’ll be up to.

4. US biotech group Iveric Bio is being bought by Astellas Pharma, marking the latest acquisition by Japanese companies seeking growth outside their home market. The deal values Iveric, formerly known as Ophthotech, at roughly $5.9bn, the Japanese drugmaker’s largest-ever acquisition.

5. The fighting in Sudan has the potential to be “worse than Ukraine” for civilians, according to the UN. Amina Mohammed, deputy secretary-general, said Sudan’s army and its rival paramilitary group were waging an indiscriminate battle for Khartoum, and she feared mass casualties.

The Big Read

Charlie Munger
Charlie Munger has warned of a brewing storm in the US commercial property market © Bloomberg

The golden age for investing is over and investors need to contend with a period of lower returns, warned Charlie Munger, in a wide-ranging and thought-provoking interview with Eric Platt and Harriet Agnew. The 99-year-old investor — sidekick to billionaire Warren Buffett — warned of a brewing storm in the US commercial property market, with American banks “full of” what he described as “bad loans”.

We’re also reading . . . 

Chart of the day

The costs of entrenched high inflation in the UK cannot be ignored. The Bank of England may not be able to fix everything, but it must get this under control, writes Martin Wolf.

Take a break from the news

Don’t miss this delightful — and fragrant — horticulturist’s green-fingered guide to New York. And do share your favourite New York florist or public garden in the comments below.

Additional contributions by Annie Jonas and Tee Zhuo