JPMorgan Chase & Co (NYSE:JPM) has upped its annual forecast for net interest income following its acquisition of failed lender First Republic Bank (NYSE:FRC).
The New York City-based banking giant said that its net interest income will rise $3 billion as it brings in more in interest payments from its purchase of First Republic Bank (NYSE:FRC) this year, according to a JPMorgan presentation for investor day on Monday.
The largest US lender expects its net interest income to rise to $84 billion from higher interest payments in 2023, increasing an earlier forecast of $81 billion, after it bought First Republic.
Shares of US regional lenders have been hammered by investors worried over the health of the US banking sector following the collapse of three banks since March, the latest being First Republic Bank. After a brutal six-week-long freefall, San Francisco-based First Republic was seized by the federal government.
After a competitive auction, the Federal Deposit Insurance Corporation (FDIC) sold First Republic to JPMorgan Chase, already the largest US bank by several measures. JPMorgan beat out PNC, as well as interest from other banks, to gain First Republic’s deposits and most of its assets. It paid the FDIC $10.6 billion as part of the deal.
America's largest lender said it expects to take around 12 months to fully integrate First Republic, which has $173 billion of loans, $30 billion of securities and $92 billion of deposits.
Like Silicon Valley Bank, which catered to the tech startup community, First Republic was also a specialty lender. It zeroed in on rich coastal Americans, enticing them with low-rate mortgages in exchange for leaving cash at the bank. However, that business model fell apart in the wake of the Silicon Valley Bank collapse, as First Republic clients took out more than $100 billion in deposits.
JPMorgan CEO Jamie Dimon earlier said the First Republic acquisition “modestly benefits the company overall,” is accretive to shareholders, helps advance JPMorgan’s wealth strategy, and is “complementary” to its existing franchise.
Contact the author Uttara Choudhury at uttara@proactiveinvestors.com
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