JPMorgan Chase & Co. has reportedly struck an agreement to purchase around $1.8 billion worth of single-family residential loans from Banc of California Inc., a move intended to bolster Banc of California's acquisition of PacWest Bancorp. The identity of the buyer, believed to be JPMorgan, was not officially named in Banc of California's recent presentation discussing a "contingent forward asset sale agreement" for its residential mortgage portfolio.
The deal forms part of a broader strategy in which Banc of California and PacWest aim to sell approximately $7 billion worth of loans, mortgage bonds, and other assets from their securities portfolios. This is intended to allow them to pay down high-cost borrowings, though it remains unclear whether JPMorgan plans to retain these loans or sell them to other investors.
In addition to purchasing assets, JPMorgan has further supported Banc of California through its roles as a financial advisor on the acquisition and sole placement agent for an equity investment from new investors Warburg Pincus and Centerbridge Partners. The bank has been an active player in addressing regional banking instability, previously acquiring First Republic Bank in May.
The banks involved aim to rectify an unprofitable situation caused by rising interest rates and deposit outflows. The assets being sold collectively yield less than 4%, and the proceeds from these sales, along with available cash, will be used to pay off $13 billion worth of borrowings costing them 5%. A $400 million injection by Warburg and Centerbridge is expected to help cover markdowns on the asset sales.
