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JPMorgan not renewing First Republic customers' personal credit lines -source

Published 05/25/2023, 01:40 PM
Updated 05/25/2023, 02:28 PM
© Reuters. FILE PHOTO: A security guard stands outside a First Republic Bank branch in San Francisco, California, U.S. April 28, 2023. REUTERS/Loren Elliott

By Jaiveer Shekhawat and Manya Saini

(Reuters) -JPMorgan Chase & Co has told clients with personal credit lines at First Republic Bank (OTC:FRCB) that it will no longer offer them when they come up for renewal, a person familiar with the matter told Reuters on Thursday.

The bank does not offer personal lines of credit and therefore has no plans to offer them to former First Republic clients when they come up for renewal, the source said.

Regulators seized First Republic and sold its assets to JPMorgan (NYSE:JPM) in early May, in their move to resolve the largest U.S. bank failure since the 2008 financial crisis.

First Republic's business model was to lure high net-worth customers with preferential rates on mortgages and loans. Its storied client base included Instacart founder Apoorva Mehta, investor Chamath Palihapitiya and real estate developer Stephen M. Ross, according to the bank's promotional materials.

Its strategy made it more vulnerable than most other regional lenders, since U.S. deposit insurance only guarantees $250,000 per savings account, leading to a larger proportion of uninsured deposits.

First Republic took one of the hardest knocks during the crisis in the banking sector in March, when depositors fled en masse, spooked by the collapse of two mid-sized lenders.

The bank had limped along since then despite a steep plunge in its share price, but investors fled again in late April when it disclosed more than $100 billion in outflows in the first quarter and a plan to explore new options.

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First Republic started amassing paper losses last year when the Fed began hiking U.S. interest rates to fight inflation.

The Information was the first to report on the bank's plans to cull First Republic's credit lines.

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