Mar 28, 2023

First Citizens Bank Buys Chunk of SVB Following Collapse Transcript

First Citizens Bank Buys Chunk of SVB Following Collapse Transcript
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First Citizens Bank has agreed to buy Silicon Valley Bank following SVB’s collapse. Read the transcript here.

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Speaker 1 (00:00):

First Citizens Bank has agreed to buy a chunk of Silicon Valley Bank for $16 billion, according to the FDIC. Those 17 branches of SVB will reopen, they’ll be known as, I believe, SVB by First Citizens and all SVB depositors are going to become First Citizens clients and customers. Prior to this deal, First Citizens had $109 billion in assets and total deposits of around 98 billion. It was the 30th largest bank in the US and obviously, it moves up that list now with this deal.

Speaker 2 (00:31):

Yeah, pretty instantly. I’m surprised they didn’t go with SVB a First Citizens brand or something like that. But at the end of the day, I think the type of transaction that we’re seeing here, it’s expected to minimize some of the disruptions for loan customers, that’s the good news there. Then the FDIC also estimating that the failure of SVB to their deposit insurance fund, they’re expecting that to be approximately $20 billion. I’m tracking a lot of the regional banks here, even in pre-market, the moves significantly higher across the board, plus some additional news around KeyCorp, which you had flagged earlier today, as well, and so all of that considered, the regional banks in the extended hours, PacWest even, moving higher by about 10% right now.

Speaker 1 (01:12):

Well, and First Citizens itself is up 55% today, and that’s because it is getting a lot bigger and so that is being reflected in the stock price. There were some questions about this company’s ability to take on because it’s 30th largest, SVB was something like 16th largest, before its collapse. And so there were some questions about its ability to digest these assets and take control of these assets. It’s actually made a little bit of a specialty of buying failed banks. We should point out to our viewers, SVB, Signature, these are not the first banks to collapse. You tend to see, on an annual basis, a handful of banks that don’t make it, they’re just not usually very large. Well, First Citizens is one of these banks that has come in and snapped up some of those smaller banks when they’ve gone under.

Speaker 2 (02:05):

Right. There’s a lot for investors to be rewarding and to be happy about, and that’s of course, factored into this pre-market move that you were mentioning. But it was really the size and the scale of the collapse of Silicone Valley Bank, and of course, all of the other tertiary or secondary even impacts that came along with that, that really caught the attention of the broader banking sector, ensued much of this turmoil and concern, because then it was a larger thought of, if Silicon Valley Bank is exposed to this and there have been such missteps on their front for activities that are quite typical at some banks, but they had so much exposure, and that ran synonymous with some of the other banks that started to collapse thereafter, even within the days and weeks to follow. Now, even as we’re seeing this acquisition take place, we talk about this time and time again that usually, when one of these goes through the company that makes the acquisition, you see them moving lower, but it’s purely a reward of how much they’re going to grow out and-

Speaker 1 (03:07):

How much they’re going to grow and at what discount they’re buying these assets.

Speaker 2 (03:09):


Speaker 1 (03:10):

We saw that with UBS and Credit Suisse, as well. By the way, speaking of UBS and Credit Suisse, Deutsche Bank, which had run into some perhaps concern over its viability on Friday, those shares are rebounding as a bunch of analysts are coming out and supporting it. A couple more things to know as we’re watching this banking system concern as it continues to unfold, Bloomberg’s reporting that US authorities, regulators, are talking about other measures to potentially step in and help the system if need be, including expansion of that emergency lending program that they had talked about.

This follows on some data that we got on Friday, we get it every week, in fact, and it’s deposit data from the banks. It showed in the week ended March 15th, we were continuing to see deposit outflows from the smaller banks and growth from the larger banks. Torsten Sløk over at Apollo bringing this chart to us, which shows those small banks versus the large banks and what has happened and obviously, you see that big drop in deposits. There has been some other reporting out there that some of those outflows have started to slow, it’s lagging that weekend in March 15th, but it’s something to continue to watch here. You see borrowing on the part of those small banks, including borrowing from the Federal Reserve, the discount window, et cetera, that’s been going up.

Speaker 2 (04:24):

Some weekly data that perhaps we’ll give a little bit more attention to in these weeks to come as.

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