First Citizens Bank’s acquisition of Silicon Valley Bank may be a turning point for the banking crisis, let me explain
This acquisition marks the first time that a bank has been acquired after failing
First Citizens Bank’s acquisition of Silicon Valley Bank may be a turning point for the banking crisis. This acquisition marks the first time that a bank has been acquired after failing since the 2008 financial crisis. It demonstrates the government’s commitment to taking necessary steps to safeguard the financial system and could contribute to stabilizing the financial system.
Under the terms of the deal, First Citizens Bank will acquire SVB’s assets of $110 billion, consisting of $56 billion in deposits and $72 billion in loans, at a discounted price of $16.5 billion.
First Citizens Bank will not pay cash upfront for the deal. Instead, it granted equity appreciation rights in its stock to the FDIC that could be worth up to $500 million. The FDIC will backstop the deal, which it estimates will cost its FDIC Insurance Fund about $20 billion due to SVB’s failure.
At the end of 2022, First Citizens Bank was about half the size of SVB. Following the acquisition, First Citizens will be slightly larger than SVB prior to its collapse, boasting an estimated $219 billion in assets.
The deal enables First Citizens to expand its presence in California and acquire wealth management capabilities in the Northeastern United States. The 17 former SVB branches will reopen as First Citizens branches on Monday.
First Citizens BancShares’ stock has soared 49% to an all-time high following the SVB deal announcement. Meanwhile, First Republic Bank’s stock jumped 23% after receiving a $30 billion rescue package from 11 of the largest banks.
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