The $30 billion package “bought time when time was needed” for First Republic, said Jeremy Barnum, JPMorgan’s chief financial officer, in a call with reporters. The bank seemed to be on the brink of failure for weeks. But it was seen as too little, too late, by analysts. It also announced plans to lay off up to a quarter of its workforce, which totaled about 7,200 employees in late 2022. But it became increasingly clear that First Republic was on borrowed time: it needed to find a buyer, or find new forms of funding to replace the deposits that had left the bank.įirst Republic planned to sell off unprofitable assets, including low interest mortgages that it provided to wealthy clients. “Too many (First Republic) customers showed their true loyalties were to their own fears,” wrote Timothy Coffey, an analyst with Janney Montgomery Scott, in a note to investors.Ī coalition of a dozen banks pulled together a $30 billion funding package for First Republic last month that, for awhile, seemed to stanch the bleeding of deposits. As was the case with Silicon Valley Bank and Signature Bank, First Republic clients with large accounts were quick to pull their money at the first sign of trouble. These banks had large amount of uninsured deposits - that is, deposits above the $250,000 limit set by the FDIC.
In return, the wealthy rarely defaulted on their loans and parked substantial sums of money in the bank that could be lent elsewhere.īut that business model of catering to the rich became a liability with the collapses of Silicon Valley Bank and Signature Bank.
Its bankers lured in wealthy clients with low-cost mortgages and attractive savings rates in order to sell them on higher profit businesses like wealth management and brokerage accounts. Its well-appointed branches served warm cookies to its clients - who were almost exclusively the rich and powerful.
Before this year, First Republic was the envy of the banking industry.
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