US banks facing pressure despite First Republic sale

NEW YORK—JPMorgan Chase’s takeover of First Republic resolved the fate of the last major bank caught up in recent upheaval, but the sector still faces a weakening economy and challenges from higher interest rates.

Ever since the March collapse of Silicon Valley Bank ignited fears of widespread failures among midsized banks, the industry has been operating under a cloud of uncertainty.

Banking figures welcomed Monday’s transaction as a pivot point, with no known major banks currently facing an existential threat.

“While the failure of any bank is regrettable, today’s decision by federal and state regulators to close First Republic Bank and sell its deposits and assets through a competitive auction will bolster confidence in the nation’s banking system,” said Rob Nichols, president of the American Bankers Association.

JPMorgan Chief Executive Jamie Dimon said the deal should reassure investors. But Dimon still sees plenty of risk.

The First Republic deal “hasn’t changed anything about the odds of a recession,” Dimon told reporters, though “I think this is going to stabilize the system, which is a good thing.”

First Republic came under renewed stress last week after disclosing deep deposit withdrawals on April 24.

But notwithstanding First Republic, April earnings reports showed a US banking industry in passable condition.

SVB, First Republic and a third casualty, Signature Bank, were essentially “one-offs,” said Cliford Rossi, a former risk management executive at Citigroup and a professor at the University of Maryland.

“Going forward, JPMorgan taking over First Republic does put that chapter behind the industry,” Rossi said.