JPMorgan Chase's First Republic acquisition bulks up bank's Bay Area presence

JPMorgan Chase has significantly expanded its Bay Area operation with the acquisition of First Republic Bank, which failed.

Chase now has a larger clientele among Silicon Valley’s most successful entrepreneurs and investors. JPMorgan Chase, unlike First Republic (NYSE: JPM), operates a major bank for the needs of these wealthy clients.

Chase now ranks second in the Bay Area behind Bank of America based on the share of deposits it holds. Chase now holds $123.8 billion of Bay Area deposits. This gives the bank a share of 21.63% of the deposits in the Bay Area, according to FDIC data as of June 30th 2022.

These figures do not include the region's share of the more than $100 billion of deposits First Republic customers have withdrawn from the bank following the failure of Silicon Valley Bank in March. According to California's Department of Financial Protection and Innovation, First Republic had almost $104 billion of deposits as of April 13. As First Republic's survival became less likely, more deposits left the bank.

With 166 branches, the combined bank will be the largest in the Bay Area. According to FDIC data from 2022, First Republic will add 31 Bay Area branch locations to Chase's 135 according to the combined bank. This compares with Wells Fargo’s 146 Bay Area locations and BofA’s 125. Chase will have to decide whether it keeps all First Republic locations as it tries to integrate the failed Bank into its operations.

Wall Street cheered the deal, as shares of the New York-based bank closed at $141.20 on Friday, an increase of $2.96 or about 2% against a flat market.

Dick Bove, an analyst at Odeon Capital Group who raised his recommendation for the bank's stock to 'buy,' from a 'hold', said to clients on Monday. He believes that Chase will earn between $500 million and $1 billion per year as a result First Republic.

Bove believes the deal will give Chase a boost in key markets such as California, New York, and Boston. First Republic has a strong wealth management business, and its workforce is regarded as one of the best when it comes to customer service.

First Republic has 84 branches located in some of America's wealthiest markets.

Jeremy Barnum said, Chase's Chief Financial Officer, on a Monday investor call, that the branches they are acquiring are located in attractive markets and locations. This is an opportunity for them to accelerate their wealth strategy.

Bloomberg reported on Monday that despite the fact that First Republic's wealth management team left the bank amid recent turmoil, the bank had assets worth almost $290 billion as of 31 March. This is up from just $107 billion a year earlier. JPMorgan Chase’s asset and wealth management platform manages more than $4.3 billion in assets for its clients.

Chase has been a Bay Area presence for many years. In 1999, it purchased investment bank Hambrecht & Quist to help some of the most promising Bay Area companies reach Wall Street. The bank inherited the J.P. Morgan Healthcare Conference as part of its H&Q purchase. This is an invitation-only event that takes place at San Francisco’s Westin St. Francis Hotel at the beginning of each year.

In 2016, the Warriors had not yet begun construction on their waterfront San Francisco stadium when the deal was signed. The naming rights contract, valued at $300m over 20 years, reportedly lasted for 20 years.

Chase is a major contributor to Bay Area charities, ranking No. San Francisco Business Times List, which ranks corporate philanthropists based on cash donations of $18,4 million to Bay Area charities.

Chase opened its Palo Alto Center last year to attract Silicon Valley talent, as it competes against a growing number fintechs, tech companies, and financial services.

The bank has also leased traditional office space at the JPMorgan Chase Building, located at 560 Mission St. downtown San Francisco. This skyscraper was designed by Cesar Pelli.