U.S. big banks are getting bigger and the FDIC is helping them: Strategist
Here are five key takeaways from JPMorgan Chase & Co.’s call with analysts on Monday about its agreement to acquire First Republic Bank:
- CEO Jamie Dimon said thinks we’re mostly out of the woods — for now. To be clear, the banking system still needs to deal with a number of threats, including commercial real estate exposure and the current rate environment. But the slate of bank failures in the past weeks ought to be abating, he said.
- JPMorgan wants to do things differently than First Republic did. Specifically, Dimon isn’t interested in adding mortgages to the balance sheet, nor does he see the bank offering the sort of jumbo mortgages to rich clients that got First Republic into trouble.
- JPMorgan is trying to keep expectations for the deal in check. Some analysts sounded perplexed over the US$500 million in earnings accretion JPMorgan expected to realize from the transaction. CFO Jeremy Barnum said the firm is trying to be conservative as it calculates the benefits from the transaction.
- Overall, Dimon was satisfied with how the situation played out. He made headlines as the key industry player trying to stabilize First Republic, which made things kind of awkward when his bank ended up being the one to buy it. If things play out in the case of other bank failures in the same way, that’s ultimately a good thing, he said.
- JPMorgan won’t keep the First Republic name. Instead, the bank will rebrand some wealth centers, with First Republic’s platforms and systems integrated into JPMorgan’s existing ones.