First Citizens Bank will buy much of Silicon Valley Bank, US regulators said, as they estimated the lender’s collapse would lead to $20bn of losses for a deposit insurance fund paid for by banks.
The Raleigh, North Carolina-based lender will take on all the deposits and loans of SVB, the once high-flying lender to tech start-ups and their investors that failed this month, the Federal Deposit Insurance Corporation said on Sunday evening. First Citizens will also operate SVB’s 17 branches.
As it announced the deal, the FDIC said the failure of SVB could cost its Deposit Insurance Fund, paid for by member banks, about $20bn. It is the latest sign of the damage caused by the collapse of SVB, the biggest bank failure since the global financial crisis.
First Citizens, which calls itself the nation’s largest family-controlled bank, has been one of the biggest buyers of troubled banks in recent years.
“We appreciate the confidence the FDIC has placed in us,” First Citizens’ chief executive Frank Holding Jr said. “First Citizens has a proud history of growing organically and through strategic acquisitions.”
He said he was “specifically” committed to SVB’s business with private equity and venture capital firms.
The FDIC said the deal would include the purchase of about $72bn of SVB’s assets at a discount. That would leave about $90bn of securities and other assets with the FDIC, which is acting as its receiver. The FDIC will receive “equity appreciation rights” linked to First Citizens’ shares, which it said could be worth as much as $500mn.
The regulator and the lender will share the losses and potential recoveries on commercial loans made by SVB, a move that First Citizens said would provide “further downside protection against potential credit losses”.
SVB had about $167bn in assets and about $119bn in deposits as of March 10, the FDIC said.
Holding Jr took over the job as chief executive of First Citizens, which was started by his grandfather in 1898, in 2008. He has since overseen nearly two dozen acquisitions in FDIC-assisted bank deals. Last year, First Citizens paid $2bn to acquire CIT, a lender to midsized corporations.
The addition of SVB’s business will significantly increase the size of First Citizens, which as of the end of last year had just over $100bn in assets and nearly $90bn in deposits, placing it as the US’s 36th largest bank, by assets. As of Friday, First Citizens bank had a market value of just over $8bn.
The deal follows a similar takeover announced a week ago for Signature Bank, the operations of which were sold to New York Community Bank-owned Flagstar.
As part of that deal, the FDIC was forced to retain $60bn worth of Signature’s loans. The federal agency has estimated that the failure and resolution of Signature bank could cost the FDIC’s insurance fund $2.5bn.
The plunge in SVB’s shares at the start of this month set off worries of brewing problems at regional lenders and the US financial system. On March 10, SVB was taken over by the FDIC after losses on its security portfolio and a failed equity raise spooked investors and depositors.
That kicked off an auction led by the FDIC for the failed lender. Along with a number of regional banks, private equity investors including Blackstone, Apollo, Carlyle, Sixth Street and HPS Investment Partners inspected SVB’s loans to consider possible offers, according to people with knowledge of the matter.
Source – Financial Times
