JPMorgan borrows from First Republic playbook to add affluent clients

JPMorgan Chase

One year after acquiring the failed First Republic Bank in an emergency deal, JPMorgan Chase is launching a new tier in its affluent-consumer wealth management services that marries its own brand, scale and distribution channels with First Republic's single-point-of-contact, concierge servicing model.

The new offering, known as J.P. Morgan Private Client, fits between the existing Chase Private Client, which generally serves mass affluent clients, and J.P. Morgan Private Bank, which caters to high- and ultrahigh-net-worth clients. Announced Monday, J.P. Morgan Private Client will be delivered through two channels — at some JPMorgan corporate offices as well as at 22 ex-First Republic branches that are being converted into "J.P. Morgan financial centers."

Two of those offices — one each in New York City and San Francisco — will open this summer, Mark O'Donovan, CEO of Chase Home Lending, told analysts during JPMorgan's 2024 investor day in New York City. O'Donovan has been leading the integration of First Republic into JPMorgan since May 2023 and overseeing the formation of the new affluent-consumer tier.

The remaining 20 financial centers are set to open by the first quarter of next year, O'Donovan said. The offering will be rolled out in phases, starting with former First Republic clients, then to existing Chase customers and eventually to new clients, he said.

And it will offer First Republic's "signature bites and even the umbrellas," O'Donovan added. First Republic was known for offering fresh-baked chocolate chip cookies and umbrellas to its clients.

"While there's a lot we plan to leverage from First Republic's model, this is not about originating low-cost mortgages to drive acquisition," said O'Donovan, referring to a key business strategy that First Republic employed. "This is all about deepening through banking and wealth."

JPMorgan scooped up most of San Francisco-based First Republic on May 1, 2023, following the latter's placement into receivership by the Federal Deposit Insurance Corp. on the same day. It was the third U.S. bank to fail last spring after the abrupt collapse of Silicon Valley Bank, which was also based in the Bay Area, spurred deposit runs at various other banks, including First Republic.

JPMorgan went to work on stabilizing First Republic's deposit base and retaining the company's client base and workforce. Core deposits, which rose 20% following the acquisition, are now steady, and JPMorgan was able to retain about 85% of First Republic's client base, O'Donovan said. It also retained about 80% of the workforce that was offered permanent jobs, he said.

Meanwhile, JPMorgan closed about half of the 84 First Republic offices that operated in eight states. Aside from the 22 offices that will offer J.P. Morgan Private Client services, the remaining former First Republic offices will be rebranded as Chase Bank branches, the company said.

JPMorgan plans to complete a major milestone during the Memorial Day weekend by moving 800,000 First Republic deposit accounts to JPMorgan's systems, O'Donovan said Monday. It already migrated 100,000 First Republic mortgage loans during the fourth quarter of last year, a move that proved to be "a tailwind" for JPMorgan's home lending business, O'Donovan added.

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The new affluent-consumer tier and how First Republic fits into JPMorgan's go-forward strategy was one of several topics covered Monday at the company's investor day. Executives in all three main business lines — consumer and community banking, commercial and investment banking and asset and wealth management — gave presentations about the firm's growth prospects.

Investors and analysts in attendance were keenly interested in how JPMorgan might choose to deploy its excess capital and whether that will involve share repurchases.

CEO Jamie Dimon was clear that buybacks are not on the horizon.

"I would make it really clear, OK?" Dimon said during a question-and-answer session at the conclusion of the investor day. "We're not going to buy a lot of stock with these prices."

Analysts were also curious about what Dimon had to say about the firm's succession plans and who might someday take over as CEO. Ultimately, it's up to the board of directors, and there is a deep bench of potential candidates who have worked in areas across the company, Dimon said.

He did signal that his eventual retirement isn't that far off.

"There are actually some really great potential CEOs here," Dimon said.

"So the time table [for retirement] is not five years anymore."