By Nupur Anand, Anirban Sen, David French and Isla Binnie

NEW YORK (Reuters) -On March 12, as several U.S. banks reeled from a crisis in confidence, JPMorgan Chase & Co put its might behind First Republic Bank, giving the troubled lender what two sources said was a $10 billion financing.

The JPMorgan facility did not stop depositors from fleeing the lender. But it turned out to be the start of a series of events – some details of which are reported here for the first time – that put JPMorgan and its chief executive, Jamie Dimon, in a pivotal role in one of the most extraordinary U.S. bank rescues of recent years.

JPMorgan bought First Republic on Monday in a government auction, culminating weeks of failed rescue attempts and aborted discussions involving some of the most powerful Wall Street executives and U.S. officials. The deal talks went down to the wire, according to two sources familiar with the situation. Four bidders, including JPMorgan, made it to the final rounds of the auction on Sunday night, one of the sources said.

JPMorgan did not know till about 1.15 a.m. in New York that it had won, even though final bids were initially due several hours prior. At one point late at night, as Dimon and other senior executives waited for the outcome of their bid, silence from Federal Deposit Insurance Corp (FDIC) made them think they had lost, one of the sources said.

The final deal, announced around 3:30 a.m., cements Dimon’s reputation as one of Wall Street’s most powerful bankers.

But the deal also raised fresh questions about the dangers of having banks that are too big to fail, the quality of regulatory oversight of the banking industry and the Biden administration’s resolve to keep corporations from becoming too powerful through deals.

Piper Sandler analysts said more than the finances, the deal was significant for JPMorgan as it solidifies the bank “as the go-to industry leader in times of turmoil.”

“The only worry we have is the at-present unknowable. JPM was already a hugely significant player that has now managed to make itself even more so at a time when ‘too-big-to-fail’ is still a political concern,” they wrote.

Dimon pushed back against any suggestion that his bank is getting too big.

“We have capabilities to serve our clients, who can be cities, schools, hospitals, governments; we bank the IMF, the World Bank,” the banker said in a conference call after the deal. “And anyone who thinks the United States should not have that can call me directly.”

The FDIC said earlier on Monday the resolution involved a “highly competitive bidding process,” and was the least costly alternative for its deposit insurance fund. 

BANKING CRISIS

First Republic was founded in 1985 by James “Jim” Herbert, son of a community banker in Ohio. The bank was bought by Merrill Lynch in 2007 right before the financial crisis. It became public again in 2010, after Merrill Lynch itself was bought by Bank of America Corp and the new owner decided to dispose of it.

First Republic’s attraction was its rich clients, and it gave them preferential rates on mortgages and loans. Its reliance on the rich also made it more vulnerable – it had a high level of uninsured deposits.

In early March, as a run on Silicon Valley Bank spooked depositors and investors, sending them into the arms of institutions they thought were safer, First Republic quickly became a target. It saw more than $100 billion fleeing in the first quarter, leaving it scrambling to raise money.

By the weekend of March 12, as regulators seized Silicon Valley Bank and Signature Bank and announced a series of emergency measures to shore up confidence in the system, First Republic said it had taken additional steps to access a total of $70 billion in funds, including from JPMorgan.

The assurance, however, failed to calm markets, and First Republic’s stock fell again the following day.

Reuters could not determine when, but at some point JPMorgan’s interest in First Republic grew to become more than its role as an adviser helping the bank bolster its finances. Part of its attraction: the lender’s roster of wealthy individuals which would add to JPMorgan’s own private banking franchise.

Prevailing wisdom at the time, however, suggested that regulators would not allow JPMorgan to buy another bank. JPMorgan holds more than 10% of the nation’s total bank deposits, and federal law prevents a large bank from an acquisition that would put it above that threshold. Acquisitions of failed banks can be exempted from the rule.

JPMorgan started a process internally, which looked at various options for First Republic, including an acquisition, according to a source familiar with the matter. The deal was internally code-named “Forest”, the source said.

The bank kept the teams separate, the source said. First Republic also had Lazard Ltd as an adviser.

TOP BIDDER

In March, a series of ideas were floated to save the bank. Dimon was among the power brokers that discussed a package by large banks to inject $30 billion in deposits. After that failed to improve confidence in the lender, Dimon was among bankers that met in Washington at a forum, where topics included aiming to work out details on what needed to be done. JPM proposed another idea that was briefly considered, of forming a consortium to buy the bank, two sources previously said.

A key hurdle to doing a private sector deal, however, was that there were billions of dollars of unrealized losses on First Republic’s books, and they would have to be funded if anyone bought the bank.

As weeks progressed, regulators came close at least once in late April to pulling the plug on the bank, one of the sources said. The situation became worse last week after its shares went into a free fall following earnings.

By Friday, the FDIC decided the bank had run out of time to find a private solution, a source previously told Reuters. Advised by Guggenheim Securities, the regulator reached out to various potential bidders, including banks and private equity firms, to solicit offers, two sources familiar with the situation said.

By late Sunday the race had narrowed to four bidders, one source said. Besides JPMorgan, PNC Financial Services Group, Citizens Financial Group Inc and Fifth Third Bancorp were also in the auction, sources have said.

The auction dragged out through the night as the FDIC’s advisors examined each bid on its merits, a source familiar with the matter said.

Each bidder put in bids for the whole bank as well as part of its assets, the source said, and the FDIC’s advisors were looking for the one which would cost the least to the depository insurance fund.

JPMorgan deployed more than 800 employees to do due diligence on the bank. While the partial bids from the three other banks held some attraction in finding a solution for First Republic, none could top JPMorgan’s pitch to buy the whole bank, one of the sources said.

(Reporting by Anirban Sen, Nupur Anand, Isla Binnie, David French, Saeed Azhar, Lananh Nguyen; Writing by Megan Davies; Editing by Paritosh Bansal and Stephen Coates)

By Akriti Sharma

(Reuters) -Tesla Inc has raised prices in a range of up to $290 in Canada, China, Japan and the United States, its website showed on Monday, after the company slashed prices of its top-selling vehicles since the start of the year.

The hike was the first on its two top-selling models at the same time in multiple markets, although prices across its lineup are much lower than in January, after a round of discounts. Shares rose nearly 2% in early trading.

Last month Chief Executive Elon Musk said the company would prioritize sales growth ahead of margins and look to profit later on its rollout of self-driving software for a larger fleet of vehicles.

Since January, Tesla has shifted to a real-time pricing model that is closer to airlines or ride-sharing from the fixed prices of the traditional auto industry model.

Musk has said the company is willing to sacrifice margin for sales volume but is also looking to move prices back higher, where it can, to match deliveries with output.

By Monday, Tesla’s website showed it had raised the starting price point by $250 on the base model Model Y and Model 3 in the United States.

Prices changed about the same amount in its second largest market of China, as well as in Canada and Japan, those websites showed.

It was the first time since January that Tesla has increased the price of its cheapest car, the Model 3, in the United States.

The entry-level, rear-wheel-drive Model 3 is still about 14% cheaper in the United States than at the start of the year. The long-range version of the Model Y remains about 24% cheaper in Tesla’s largest market.

Several analysts said the move reflected Tesla’s dynamic pricing strategy and was unlikely to undo the significant price cuts that sent the company’s gross margins to a two-year low in the first quarter.

“This doesn’t change much for the company. We would need to see several price increases for this to be an effective reversal (of the price cuts),” said Craig Irwin, analyst at Roth Capital.

In Canada, Tesla raised prices by C$300 ($222) for the performance versions of its Model 3 and Model Y. In Japan, prices for the entry-level Model 3 rose 37,000 yen ($269).

In China, Tesla raised the price of variants by 2,000 yuan ($289), the website showed.

Tesla started cutting sticker prices in China last year, kicking off a price war in the world’s largest market where it takes on a range of domestic electric car brands led by BYD Co Ltd.

($1=6.9110 Chinese yuan renminbi)

($1=137.5400 yen)

($1=0.9102 euros)

($1=C$1.3532)

(Reporting by Akriti Sharma and Samrhitha Arunasalam in Bengaluru; Writing by Kevin Krolicki; Editing by Nivedita Bhattacharjee, Clarence Fernandez and Dhanya Ann Thoppil)

By Joseph White

LOUISVILLE, Kentucky (Reuters) – Shutting down the assembly lines that build Super Duty pickup trucks at Ford Motor Co’s Kentucky Truck Plant is a multimillion-dollar action company managers try hard to avoid.

As part of a new approach to stamping out quality demons, Kentucky Truck Plant manager Joseph Closurdo said he stopped production for as long as three days earlier this year. The halts gave engineers and suppliers time to fix defective parts discovered as workers began building a new generation of Ford’s highly profitable heavy-duty pickups.

“We would shut the build down if we weren’t meeting one of the targets” for quality, Closurdo said on the plant floor last week.

Halting the assembly line rather than building trucks and fixing them later was just one element of a new approach to attacking quality problems that Ford is road-testing with the launch of the redesigned Super Duty trucks.

Ford’s Super Duty model line has been around since 1998. A successful launch for the latest generation is critical for Ford to hit profit targets for this year. The automaker will report first-quarter results on Tuesday afternoon after the close of New York stock market trading.

The Super Duty trucks, heavy-duty pickups designed to tow large trailers or handle rugged commercial tasks, now come in luxury versions that can sell for more than $100,000. The Super Duties are among the most profitable vehicles Ford sells, generating billions in annual profit, analysts estimate.  

Slashing the tax that quality problems levy on Ford’s profitability has become Job One for Chief Executive Jim Farley. Ford spent $4.17 billion on warranty claims last year, more than larger rival General Motors Co. A successful launch for the Super Duty line is critical for Ford to hit its profit targets for this year.

Ford executives bet that investing more to catch quality problems early will pay off in the long run.

“We set the standard to be better than the outgoing product. We did not start shipping until we saw consistent delivery on those targets,” Super Duty Chief Engineer Andrew Kernahan told Reuters. “It took us longer than was planned.”

TOUCHING EVERY BUTTON

Kentucky Truck added 300 quality inspectors, and more engineers to chase down the root causes of defects and design new digital tools for catching problems before trucks rolled off the end of the line.

Workers now use a camera to feed images of electrical connections to software that can determine whether the connectors are properly connected.

Around the plant, engineers built command centers with more big screens than many sports bars, all displaying data from different assembly stations. One command center, with 16 screens, is known as Claire’s Corner because it was designed by process engineering manager Claire Yarmak.

“The complexity of this vehicle is huge,” Yarmak said. New comfort features, such as a front seat that reclines to create a sleeping bed, create new opportunities for trouble. When a sensor hooked into Yarmak’s screens detected a defective sensor in the sleeper seat, the line stopped.

Instead of test-driving a small sample of trucks to check for squeaks, rattles or infotainment system glitches – problems that take down scores on external quality surveys – Kentucky Truck deployed workers to drive 28,000 of the first new-generation Super Duties along a 25-mile (40 km) route near the factory.

“If it’s got a button, touch it. Make sure it works,” said David Jones, a member of the test-driving team and a 34-year Ford veteran whose father also worked at Kentucky Truck.

Instead of building all the different versions of the Super Duty from the start, Kentucky Truck started with the simplest work trucks and worked up to models such as Tremor diesel that has more electronic features and luxury appointments and a price tag as high as $119,000.

Even more expensive King Ranch and Platinum Super Duty models are just going into production now, Closurdo said.

Kentucky Truck’s dual assembly lines are now running at close to full speed, cranking out a new Super Duty, as well as Lincoln Navigator and Ford Expedition SUVs, at a pace of roughly one a minute.

Lessons learned from the Super Duty launch process are being relayed to factories that will launch the next new Ford vehicles, including a redesigned Mustang, Closurdo said.

“It’s the benchmark,” he said.

(Reporting by Joe White in Louisville, Kentucky; Editing by Matthew Lewis)

By Ananya Mariam Rajesh and Hilary Russ

(Reuters) -Restaurant Brands International Inc beat Wall Street estimates for first-quarter revenue and profit on Tuesday, boosted by higher traffic and prices at Tim Hortons restaurants in Canada despite closures of some U.S. Burger King locations.

The company’s global comparable sales rose nearly 10% in the March quarter, versus analysts’ estimates of 6.5% according to Refinitiv IBES data. Tim Hortons Canada sales grew 16% and Burger King International’s were 12% higher. Shares were up 1.5%.

Big restaurant chains have posted strong sales in the first quarter despite rising concerns about consumer spending power this year amid stubbornly high inflation.

McDonald’s Corp and Chipotle Mexican Grill Inc also topped quarterly sales and profit expectations as they pushed new menu items and raised prices over the past year to protect margins from a jump in raw materials and labor costs.

While Burger King has been adding restaurants and growing comparable sales internationally, in the United States it has struggled with bankruptcies by two big franchisees.

In the first quarter, Burger King closed a net 124 U.S. locations or 1.7%, to end the quarter with just under 7,000 U.S. restaurants, according to its earnings release.

This year, the brand is seeking additional franchisees with stronger finances but still expects to close between 300 and 400 more restaurants, Chief Executive Joshua Kobza said during a call with investors. Usually, it closes a couple hundred annually, he said.

“There will always be a minority (of franchisees) who aren’t dedicated, enthusiastic operators,” Chairman Patrick Doyle said on the call. “We’ll work with them to leave the system.”

The brand’s $400 million “Reclaim the Flame” turnaround plan – to reverse its loss of market share, revive run-down restaurants, streamline overly complicated menus and operations, and draw more young customers – may be starting to work as Burger King’s U.S. comparable sales rose 8.7%.

Tim Hortons drove visits higher – including during afternoon hours – with new items like chipotle steak for its loaded bowls and wraps.

Higher menu prices and other offerings like cold brew also drove sales.

Excluding items, Restaurant Brands, which also owns Popeyes and Firehouse Subs, earned 75 cents per share, compared with estimates of 64 cents, according to Refinitiv IBES data.

Total revenue rose to $1.59 billion from $1.45 billion a year earlier. Analysts on average had expected $1.56 billion.

(Reporting by Ananya Mariam Rajesh in Bengaluru and Hilary Russ in New York; Editing by Subhranshu Sahu and Jonathan Oatis)

By Medha Singh

(Reuters) -What’s the cost of students using ChatGPT for homework? For U.S. education services provider Chegg Inc, it could be nearly $1 billion in market valuation.    

Chegg signaled the rising popularity of viral chatbot ChatGPT was pressuring its subscriber growth and prompted it to suspend its full-year outlook, sending shares of the company 47% lower in early trading on Tuesday.

“Since March, we saw a significant spike in student interest in ChatGPT. We now believe it’s having an impact on our new customer growth rate,” said Chegg CEO Dan Rosensweig.

There are fears Chegg’s core business could become extinct as consumers experiment with free artificial intelligence (AI) tools, said analyst Brent Thill at Jefferies, which downgraded the stock to “hold”.

Last month, the Santa Clara, California-based firm said it would launch ChatGPT’s AI powered CheggMate, a study aide tailored to students’ needs, at a time educators were grappling with the consequences of the homework drafting chatbot.

However, analysts said it was unclear if CheggMate would be enough to counter a slowdown in company’s core business.

“We fear Chegg could start to lose mind-share before CheggMate fully rolls out,” Thill said.

If losses hold through the session, Chegg would lose $994 million in market capitalization.

Shares of Chegg’s UK rival Pearson PLC shed nearly 11.5% on Tuesday.

Chegg said it was suspending its full-year outlook due to uncertainty of the impact on results and targeted second-quarter total revenue between $175 million and $178 million, which fell short of Wall Street expectations of $186.3 million.

“Chegg has to make significant changes in a rapidly changing environment that is akin to ‘dancing in the rain without getting wet,'” said Arvind Ramnani, analyst at Piper Sandler.

(Reporting by Medha Singh in Bengaluru, additional reporting by Aditya Soni; Editing by Shinjini Ganguli)

By Ariba Shahid

KARACHI, Pakistan (Reuters) -Pakistan inflation rose to a record 36.4% in the year to April driven mainly by food prices, the highest rate in South Asia and up from March’s 35.4%, the statistics bureau said on Tuesday.

Pakistan’s rural areas recorded food inflation of 40.2%, the bureau told Reuters. Food inflation for both rural and urban areas reached 48.1%, the highest since FY16 when the bureau started recording the categories separately.

Prices rose 2.4% in April from March, the bureau said in a press release.

“The higher reading was expected over the hyperinflation in the food segment,” said Amreen Soorani, head of research at JS Capital, a Karachi based investment company.

“While the trend may continue for a couple of months more, the base effect is likely to kick in from June-2023, slowing the pace.”

The finance ministry said headline inflation was expected to remain at elevated levels in the months to come, despite contractionary monetary policy by the central bank.

Pakistan has been in economic turmoil for months with an acute balance of payments crisis while talks with the International Monetary Fund to secure $1.1 billion as part of a $6.5 billion bailout have not been successful.

The country has taken measures to try to secure the funding, including removing caps on the exchange rate, resulting in a depreciating currency, increasing taxes, removing subsidies and raising key interest rates to a record high of 21%.

The finance ministry said a successful completion of talks with the IMF will eventually attract more capital inflows, stabilise the exchange rate and alleviate inflationary pressures.

Persistently high inflation has resulted in major lifestyle and consumption changes, with a greater number of people seeking help.

(Reporting by Ariba Shahid; Editing by Toby Chopra and Nick Macfie)

By Sourasis Bose

(Reuters) – Top U.S. liquefied natural gas (LNG) exporter Cheniere Energy Inc raised its 2023 core earnings forecast on Tuesday after reporting a quarterly profit compared with a year-ago loss, sending its shares up about 1.8% in premarket trading.

The United States has emerged as the world’s largest LNG exporter after Western sanctions on major supplier Russia left Europe scrambling to find alternate sources of the commodity.

Cheniere raised its consolidated adjusted core earnings forecast for 2023 to $8.2 billion-$8.7 billion from $8 billion-$8.5 billion. Analysts on average had expected $8.39 billion, according to Refinitiv.

“LNG supply will remain tight in the winter of 2023-2024, particularly if the weather is colder than this past winter and Chinese LNG demand increases as forecasted,” said Ryan Keeney, an analyst at Third Bridge.

Cheniere also expects higher distributable cash flow in 2023.

“We set a new quarterly LNG production record in the first quarter,” said Chief Executive Officer Jack Fusco.

The Houston-based energy firm said it delivered 619 trillion British thermal units (tBtu) of LNG in the quarter ended March 31, compared with 592 tBtu a year earlier.

According to Swiss bank UBS, more than 70% of U.S. LNG cargoes went to Europe in the first quarter.

Because of the hedging Cheniere did at the end of last year and earlier this year, its first-quarter earnings were insulated from the impact of falling gas prices, said Robert Mosca, an analyst at Mizuho Securities, ahead of the earnings.

Cheniere posted net income of $5.4 billion, or $22.10 per share, compared with average analysts’ estimate of $5.52 per share, according to Refinitiv.

Cheniere is the biggest U.S. buyer of natural gas and the biggest U.S. exporter of LNG with the capacity to produce about 45 million tonnes per annum (MTPA) of LNG at its two facilities: Corpus Christi in Texas and Sabine in Louisiana.

The company is also building new liquefaction trains at Corpus that will add over 10-MTPA of capacity between 2025-2027, and is developing expansions that could add another 20 MTPA at Sabine and 3 MTPA at Corpus.

(Reporting by Sourasis Bose in Bengaluru and Scott DiSavino in New York; Editing by Subhranshu Sahu and Bernadette Baum)

FRANKFURT (Reuters) – Euro zone inflation accelerated last month but underlying price growth eased unexpectedly, adding to arguments for a smaller interest rate hike at the European Central Bank’s regular policy meeting on Thursday.

Inflation has slowed sharply from double-digit readings late last year but remains far too high, making another rate hike a necessity and leaving only its size up for debate, with ECB policymakers split between a 25 and a 50 basis point move.

Overall price growth in the 20 nations sharing the euro currency picked up to 7.0% in April from 6.9% a month earlier, Eurostat said on Tuesday, in line with expectations in a Reuters poll of economists.

But the focus in recent months has been squarely on underlying or core inflation, a surprising rise in which has suggested that price pressures are mounting and that the ECB lacks a firm understanding of where inflation could be heading.

Excluding volatile food and fuel prices, core inflation slowed to 7.3% from 7.5%, while an even narrower measure, which excludes alcohol and tobacco, slowed to 5.6% from 5.7%, coming below forecasts for 5.7% for its first decline since last June.

In a hopeful development for the ECB, processed food, alcohol and tobacco inflation slowed a full percentage point to 14.7%, suggesting that a long-awaited turnaround in food prices may now be happening.

The small core inflation surprise comes as the ECB’s quarterly survey of bank lending pointed to an exceptionally large drop in credit demand amid tighter lending criteria, adding to the case for a smaller rate hike.

The ECB has raised interest rates by at least 50 basis points at each of its past six meetings.

Some policymakers, including French central bank chief Francois Villeroy de Galhau, have made the case for a more measured move this month, arguing that the ECB has already lifted borrowing costs sharply enough to restrict the economy.

But others, including board member Isabel Schnabel, have said that a 50 basis point move needs to remain among the options because price growth is proving sticky, raising the risk that it could level off above the ECB’s 2% target.

Nearly all 26 members of the Governing Council appear to agree that more policy tightening is required after a record 350 basis points of rate increases since July.

A key worry is that wage growth is now accelerating above expectations and this will drive up the cost of services, the single largest item in the consumer price basket.

Services inflation accelerated to 5.2% from 5.1% but the price growth of non-energy industrial goods, another crucial segments, slowed to 6.2% from 6.6%.

Investors see the ECB’s 3% deposit rate rising to around 3.75% by the end of the summer although rate expectations have been volatile in recent months, moving in a wide range since the financial market turbulence of March.

(Reporting by Balazs Koranyi; Editing by Catherine Evans)