When Jamie Dimon visited Boston in 2018 to herald the first Chase bank branches here, he described what seemed like an impossible goal. Even for America’s biggest bank.
The JPMorgan Chase chief executive said he would not be satisfied until his company is among Boston’s top three banks.
Now, less than five years later, Dimon is closing in on that goal. Although he probably never expected to do it quite like this.
JPMorgan’s takeover of First Republic on Monday suddenly gives it a big market share here. California-based First Republic only has five Boston-area branches. But as of June 30 last year, it reported $18 billion worth of deposits here, largely amassed by catering to the well-to-do. Good enough to make First Republic the sixth-largest bank in the region (excluding State Street, which is not a retail bank). Sure, plenty of customers have fled in recent weeks amid concerns about First Republic’s future. But even half that amount would make Dimon a big banking player in Boston.
In comparison, Chase had only $1.9 billion in deposits in the Boston metro area as of last summer, spread among 37 branches. The New York-based company was in 33rd place statewide — ranking it between South Shore Bank and Florence Bank — and 23rd in Greater Boston. (A spokeswoman confirmed Chase has 43 Massachusetts branches today, with the next one opening in Lawrence on May 16.)
Clearly, Chase still had some work to do.
Toward that end, the bank announced plans last August to double down on Massachusetts: It would grow to 90 branches in this state by the end of 2025. Even that kind of growth might not significantly rattle Massachusetts market leaders Bank of America, Citizens, and Santander. They all got to where they are through deal-making. But federal regulators have blocked Chase from any more acquisitions — traditional ones, anyway — because it holds more than 10 percent of bank deposits nationwide. Chase had to bulk up in Boston branch by branch, opening them one at a time.
So why did Dimon focus on Boston?
First, back in 2018, Dimon identified three big holes on his nationwide map: Boston, Philadelphia, Washington. It was time to finally open branches in those cities, as part of a broader expansion that would bring Chase 400 new locations over a five-year period. Dimon wanted Chase to be the first true national bank, with branches in all 48 contiguous states. Despite the pandemic interrupting everyone’s plans, Chase arrived there in 2021. Plus, Dimon was already familiar with the lay of the land here, having spent eight formative years here, including four at Tufts and two at Harvard Business School.
The Boston market is also attractive to bankers in general because of its wealth. That’s certainly why executives at First Republic’s headquarters in San Francisco found it appealing when they decided to open their bank’s first full-service branch here in 2006, on Federal Street.
Expanding into a market on a “de novo” basis — opening new branches instead of through an acquisition — is tough. Really tough. It’s even harder in Massachusetts because of the competition posed by the state’s healthy ecosystem of community banks, at least 100 of them. This vibrant scene of homegrown banks makes Massachusetts unique, particularly because most are mutual banks that aren’t subject to the whims of the stock market, according to Samantha Kirby, co-chair of law firm Goodwin Procter’s banking practice.
Citigroup famously tried to go “de novo” to expand into Boston but gave up, deciding in 2015 to close its retail branches here.
First Republic, however, proved it could be done. It did make one teensy-tiny New England acquisition back in 2006 — for a charter, not customers. And after First Republic’s 2010 IPO, its business in Boston took off like a rocket ship.
First Republic did it by focusing on wealthy customers, including bigwigs in finance and real estate, offering white-glove service and low-rate jumbo mortgages. In return, these clients brought everything from their wealth management business to development loans under the First Republic roof.
This engendered a fierce loyalty. In March, when it seemed First Republic might follow Silicon Valley Bank into collapse, Boston real estate lawyer EJ Schneider rounded up a who’s who of Boston real estate to sign a statement of support. Schneider, a partner at Dalton & Finegold, says First Republic bankers offered a “curated customer experience,” acting as personal quarterbacks for finances. The bank, as Schneider puts it, believed in relationships as well as balance sheets.
In the end, though, this reliance on wealthy clients came back to haunt First Republic. As with SVB, too many of First Republic’s deposit accounts were over the FDIC insurance level of $250,000. Fear set in, and a bank run was on. Last week, First Republic said it lost roughly half of its deposits since the end of the year. To save what was left, federal regulators orchestrated a fire sale last weekend, and JPMorgan Chase apparently offered the best deal for the FDIC’s deposit insurance fund. The feds essentially waived their block on the bank’s acquisitions to make the deal happen.
The First Republic name will go away. Beyond that, the future is unclear. Some customers say they expect to lose the personal attention that made First Republic special. Gerard Cassidy, a bank analyst with RBC Capital Markets, says Chase will not continue that level of high-touch service. JPMorgan Chase has been far more profitable, he notes, with 2.5 times the return on equity that First Republic had as of the end of 2022. Guess which business model will likely prevail post-acquisition.
Dimon has come across as a reluctant rescuer. But the bank bragged to investors on Monday how First Republic’s franchise will complement the J.P. Morgan and Chase franchises — particularly when it comes to wealth management.
We won’t know how far up JPMorgan Chase moves in the Massachusetts rankings until later this summer. Even after assuming only half of the First Republic business remains after all this tumult, Dimon’s bank will be in the top 10 in metro Boston. BofA and Citizens may remain forever out of reach in this market. However, the likes of Santander, Eastern, and TD are suddenly within striking distance.
Top three? Sure sounded crazy once upon a time. But not so crazy anymore.