Correct. JPMorgan “is not assuming First Republic’s corporate debt or preferred stock” [1]. Including that debt, the total value vaporised could be up to $40bn [2].
That said, JPMorgan acquired “substantially all of the assets of First Republic Bank,” so there will be scraps to fight over.
I'm surprised the debt got totally wiped out too on $220B in (HTM) assets vs $100B in deposits. Those assets have to be severely discounted to arrive at JPMorgan's $2.6B windfall figure. Just last week Levine was saying:
> First Republic estimated as of Dec. 31 that its assets were worth about $27 billion less than their carrying value. So figure its assets are worth something like $206 billion on a good day.
So I'm wondering where the gap is.
> Meanwhile it has ... about $105 billion of secured borrowing from the Federal Reserve and Federal Home Loan Bank system.
Presumably JPMorgan is assuming FR's debt to the these central banks?
Correct. JPMorgan “is not assuming First Republic’s corporate debt or preferred stock” [1]. Including that debt, the total value vaporised could be up to $40bn [2].
That said, JPMorgan acquired “substantially all of the assets of First Republic Bank,” so there will be scraps to fight over.
[1] https://www.ft.com/content/0c61a540-e6be-4bca-8054-841d99837...
[2] https://ycharts.com/companies/FRC/enterprise_value