First Citizens BancShares Inc.’s stock soared after the company reported deposits that surpassed estimates following its rescue deal for Silicon Valley Bank, which was wiped out by a run on deposits.
(Bloomberg) — First Citizens BancShares Inc.’s stock soared after the company reported deposits that surpassed estimates following its rescue deal for Silicon Valley Bank, which was wiped out by a run on deposits.
Deposits were $140.05 billion for the first three months of the year, Raleigh, North Carolina-based First Citizens said Wednesday, beating analyst estimates of $119 billion.
The SVB acquisition added a $9.82 billion preliminary gain to First Citizens’ net income and contributed $65 million of its $850 million in net interest income for the quarter, according to a statement.
“This transaction meaningfully boosted our capital base, providing us with an even more solid foundation to continue growing profitably while delivering long-term value to our shareholders,” Chief Executive Officer Frank Holding Jr.
said on a conference call with analysts.
First Citizens shares surged as much as 14% Wednesday morning, and were up 8% at 10:29 a.m. in New York. They’ve gained 56% this year.
The results give investors the first significant look at how the rescue deal for SVB in late March — which vaulted First Citizens into the top 15 US banks — impacted the lender.
First Citizens had agreed to buy $72 billion of SVB’s assets at a discount of $16.5 billion, and assumed $56 billion of its deposits. It said at that time that 17 legacy branches will begin operating as Silicon Valley Bank, a division of First Citizens.
First Citizens forecast full-year deposits to drop slightly, ending the year between $132 billion and $137 billion — a range still higher than analysts estimated.
It expects adjusted non-interest expenses to hit between $1.25 billion to $1.3 billion next quarter, from $677 million in the first three months of the year.
The company also predicted a net-charge-off ratio for the full year in the range of 25 to 35 basis points.
Second quarter charge-offs would be in the 35 to 45 basis point range, which includes a $45 million charge-off related to the SVB acquisition included in purchase accounting.
In an “abundance of caution,” First Citizens also increased funding with the Federal Home Loan Bank system by $4.3 billion in March, when the turmoil engulfed a number of regional lenders including New York-based Signature Bank.
Provisions for credit losses were $783 million in the first quarter, compared to $79 million at the end of the year, owing to the SVB acquisition, First Citizens said.
SVB unraveled in less than 48 hours in early March after a rush of customer withdrawals forced it to take huge losses on sales of securities which lost value as interest rates climbed.
First Citizens has experience buying broken rivals. It has acquired more than 20 FDIC-assisted banks since 2009, striking a series of deals after the financial crisis from Washington to Wisconsin and Pennsylvania.
(Updates with shares starting in first paragraph.)
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