What is left of troubled Silicon Valley Bank is to be acquired by First Citizens Bank. First Citizens shares were up over 50% at one point of trading today as the deal will see First Citizens Bank purchase around $72 billion worth of Silicon Valley Bank assets. Assets at a discount of $16.5 billion. However, around $90 billion in securities and other assets will remain “in receivership for disposition by the FDIC”.
This deal occurs just over two weeks after Silicon Valley became the second largest bank failure in US History. Market analysts are applauding this deal and are saying the markets will react positively as fears of banking contagion recede.
The FDIC has also received equity appreciation rights in First Citizens. Common stock with a potential value of up to $500 million.
“The 17 former branches of Silicon Valley Bridge Bank, National Association, will open as First-Citizens Bank & Trust Company on Monday, March 27, 2023,” the FDIC statement said Monday. First-Citizens Bank & Trust Company is a subsidiary of First Citizens BancShares.
“Customers of Silicon Valley Bridge Bank, National Association, should continue to use their current branch until they receive notice from First-Citizens Bank & Trust Company that systems conversions have been completed to allow full-service banking at all of its other branch locations.”
First Citizens and the FDIC have also entered into a ‘loss-share transaction’, in which the FDIC absorbs part of the loss on a particular pool of assets on the commercial loans purchased from the Silicon Valley Bank bridge bank. The bridge bank being where the FDIC transferred all of Silicon Valley Banks deposits and assets earlier this month.
“The loss–share transaction is projected to maximize recoveries on the assets by keeping them in the private sector. The transaction is also expected to minimize disruptions for loan customers,” the FDIC explained.
First Citizens BancShares (ticker: FCNCA) is currently up over 48% at time of writing. The stock has crossed back above $800, and is very close to the previous all time record highs set around $920.
US stock markets initially popped in the morning on the news as banking fears receded. However, it is far too early in the trading day, and intraday, US markets have just about given back most of their early gains. The Nasdaq being the closest to hit flat and potentially flip negative.
If we take a look at some other bank stocks, Credit Suisse is still hovering below $1.00, near all time previous record lows.
Another European bank on investors ‘troubled’ bank lists is Deutsche Bank. The stock tested a major support zone at the $9.00 zone last week. Buyers stepped in and the support still stands. A close above $10.50 would see any downside pressures subside.