JPMorgan sees $3 billion net interest income boost from First Republic deal

According to a presentation made public ahead of JPMorgan Chase & Co.’s investor day on Monday, the bank’s acquisition of bankrupt First Republic Bank (OTC:FRCB) will increase net interest income for the company by $3 billion this year.

After First Republic was shut down by authorities earlier this month, the largest U.S. lender agreed to take into its books $173 billion of the bankrupt bank’s loans, $30 billion of securities, and $92 billion of deposits.

First Republic is currently being integrated by the Wall Street behemoth, which will probably take a year or so.

Due to an infusion of deposits from clients looking for safety in more prominent institutions, JPMorgan (NYSE:JPM) stated it is still enthusiastic about the acquisition. It was one of the significant benefactors of the current banking crisis.

First Republic was the third regional lender in the United States to fail since March, causing a shakeup in the whole financial industry that put pressure on mid-sized banks and roiled financial equities.

As rising interest rates reduced the value of debt portfolios and deteriorated commercial real estate loans, bank failures exposed flaws in balance sheets.

According to economists, a U.S. default could result in a market meltdown, a rise in borrowing prices, and a hit to the global economy on par with the 2008 financial crisis.

While the global economy is performing well, according to JPM Morgan’s President and Chief Operating Officer, it is beginning to deteriorate.

The organisation reaffirmed its 17% return on tangible common equity (ROTCE) goal, a key metric for assessing how effectively a bank uses shareholder funds to produce profit. It stated that over the medium term, it expects expense growth to be in the low-to-mid single digits.

The “Goliath is winning” theme may be seen in Wells Fargo’s (NYSE:WFC) presentation, according to analysts led by Mike Mayo.

“The slides reflect benefits of scale given its aim and ability to generate superior ROTCE on one of the highest capital levels among big banks,” the brokerage said in a note.