JPM - JPMorgan's rescue of First Republic Bank should end forced sale of banks: BofA

2023-05-01 08:22:57 ET

JPMorgan Chase's ( NYSE: JPM ) acquisition of First Republic Bank ( NYSE: FRC ) "should likely end forced sales of banks due to deposit flight," said Bank of America Securities analyst Ebraham Poonawala in a note to clients on Monday.

Still, there will likely be other banks that may have to deal with profitability challenges, prompting management teams to evaluate their strategic options, he said.

The analyst also pointed out that the acquisition of FRC protects all deposits — insured and uninsured — and didn't require a systemic risk exception.

"At first blush we view this as a positive transaction for JPM and sentiment around bank stocks," he said. The deal gives a boost to JPMorgan's ( JPM ) private bank strategy adding an "army of private bankers (and high net worth client relationships) on the U.S. West and East coasts."

JPM emerging as the winning bidder for First Republic ( FRC ) didn't come as a surprise to Poonawala, "given that there were few banks, if any having the balance sheeet and operations capacity (and the desire) to acquire FRC."

More on First Republic:

• JPMorgan Chase pays $10.6B to FDIC for First Republic Bank acquisition
• First Republic is seized, will be sold to JPMorgan
• First Republic Bank: Seems Done

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