First Republic Bank (FRB) was one of the main players in the distress that passed through the American banking sector in recent months. Wanting to nip its growth in the bud, the Californian regulator took control of the bankrupt institution and sold its assets to JPMorgan Chase. Almost a month later, the new owner announced that 15% of the current workforce, or 1,000 people, would lose their jobs as part of the restructuring. This number may increase over time.
JPMorgan Chase Lays Off Workers from Acquired FRB
According to Thursday's information, JPMorgan Chase offered permanent or temporary employment to 85% of FRB's current workforce. However, the rest of the employees of the bankrupt lender, found out that there was no place for them in the new structures being formed after the takeover, according to information presented by Bloomberg, who cited a person familiar with the matter.
Over time, the number of layoffs may exceed 1,000, as many employees have received only a temporary employment offer for three, six, nine and twelve months.
"Since our acquisition of First Republic on May 1, we've been transparent with their employees and kept our promise to update them on their employment status within 30 days," a spokesperson for New York-based JPMorgan commented. "We recognize that they have been under stress and uncertainty since March and hope that today will bring clarity and closure."
The bankrupt FRB had its own employment-cutting plans by 25% at the end of April. However, these turned out to be insufficient, and a few days later, the institution declared bankruptcy . For JPMorgan, which employs nearly 300,000 people in total, laying off a thousand does not seem to be a significant move for such a large structure.
Through the acquisition, JPMorgan took over $173 billion in loans, $30 billion in securities, and $92 billion in deposits. The most prominent American bank has become even larger thanks to this takeover. As it forecasts, acquiring FRB will increase its annual income by an additional $500 million.
The Story of the First Republic Bank's Fall
First Republic was founded in 1985, and after the financial crisis of 2008, it attracted many high-net-worth clients. However, in March, it experienced a very dynamic outflow of deposits, exceeding $100 million in one month after an earlier payout of almost $200 million last year. Consequently, problems quickly began to pile up, leading to the institution's final downfall a few weeks later.
"The DFPI (California Department of Financial Protection and Innovation) appointed the Federal Deposit Insurance Corporation (FDIC) as receiver of First Republic Bank," a regulatory announcement stated.
The fall of First Republic occurred two months after two large American banks, Silicon Valley Bank and Signature Bank, came under the FDIC's administration, and another, Silvergate Bank, announced voluntary liquidation.
