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Inside the Extrordinary Sale of Troubled First Republic to JP Morgan. Small Banks Just Got ‘Screwed’ Big Time. says DICK BOVE. JP Morgan is now, in effect, the Central Bank of America, he says
The CONVERSATION examines the sale of troubled California-based First Republic bank to JP Morgan. The deal comes after a stormy period in the banking sector with the failures of Silicon Valley and Signature banks, a dark cloud hanging over First Republic and a brewing S&L-style crisis facing many banks. “The Federal Reserve and the FDIC just screwed smaller banks in America big time,” says DICK BOVE, chief financial strategest at ODEON CAPITAL GROUP, referring to the First Republic sale brokered by regulators. “JP Morgan now effectively becomes the Central Bank of the US,” he adds, referring to the sheer scale and size of JP Morgan post the sale. Additionally, regulators will assess a special premium on other banks for the cost of the deal.
JP Morgan, already America’s largest banks by assets, picks up First Republic with 84 branches catering to mostly wealthy clients, for $10.6 billion. JP Morgan has some 4,800 branches, and now a larger national footprint with the acquistion. Indeed, JP Morgan is likely to see its profitability grow by $1 billion on an annual basis, according to BOVE, a sum that far exceeds official estimates. In light of the bank crisis, BOVE says the evidence points to a new game in time, short sellers punishing vulnerable banks.
Elsewhere, the CONVERSATION looks at the trajectory of inflation, interest rates and jobs. Then there is the high-stakes drama of the debt ceiling talks in Washington. Our host, JOHN AIDAN BYRNE, notes how the number of high-wage earners filing for unemployment benefits has hit a new record, raising concerns about the overall state of the labor markets.
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