NEW YORK, May 22 (Reuters Breakingviews) - JPMorgan (JPM.N) boss Jamie Dimon didn’t buy First Republic Bank in a crisis-hewn weekend deal just for the fuzzy glow from helping to stabilize the U.S. banking system. Turns out, there are plenty of financial benefits too.
The giant lender laid out some of the impact of acquiring First Republic out of receivership in its investor day on Monday. There’s the $3 billion of contribution to net interest income from the deal, boosting this year’s expected total to $84 billion. That is on top of the $2.6 billion accounting gain the bank announced a few weeks ago.
More enticing, perhaps, is the $200 billion in wealth-management money the bank has taken from its defunct rival, along with roughly 200 advisers. First Republic last year made around $300 million of earnings from its wealthy clients. While the business has depleted somewhat, if Dimon’s troops can refill the pot, on the 10-times multiple that investors value JPMorgan’s earnings, it’s worth $3 billion of extra value.
JPMorgan is so big, with nearly $4 trillion of assets, it’s hard to move the needle in regular banking. So the best way is to go up-market. The bank’s executives lamented on Monday their share of rich customers’ wallets is lower than they’d like, but noted that First Republic’s premium locations cover half of their existing wealth-management clients. Out of crisis comes opportunity. (By John Foley)
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