First Citizens Bank has announced its intention to purchase most of Silicon Valley Bank’s business. The deal will include the acquisition of all of the deposits and loans that were transferred to a bridge bank upon the failure of SVB.
What the Deal Includes
First Citizens Bank will assume SVB assets totaling $110 billion, including both deposits and loans. This includes the acquisition of SVB’s loans, which have a value of $72 billion, as well as deposits worth $56 billion. This purchase translates to a 15% discount on SVB’s assets, or approximately $16.5 billion.
Branches and FDIC Agreement
Seventeen former branches of SVB will begin operating as “Silicon Valley Bank, a division of First Citizens Bank” on March 27, 2023. Furthermore, First Citizens has entered into an agreement with FDIC to protect them against potential losses on the commercial loans it is acquiring. FDIC has agreed to guarantee all deposits, including those above the usual limit of $250,000 per account.
What Happened to SVB
Silicon Valley Bank was shut down after clients withdrew $42 billion in a single day, making it the second-largest bank failure in US history. In response to this failure, the FDIC stepped in to protect depositors and enable an orderly wind-down of the bank’s operations.
Future Prospects for First Citizens Bank
Frank B. Holding, First Citizens Chairman and CEO said in a statement that they are committed to building on and preserving the strong relationships that legacy SVB’s Global Fund Banking business has with private equity and venture capital firms. This acquisition represents a significant step towards expanding its commercial banking activities.
Impact on Financial Markets
The collapse of SVB and Signature Bank has roiled global financial markets and triggered a collapse in confidence among investors and depositors in other vulnerable banks. Credit Suisse had to be rescued by UBS in an emergency takeover orchestrated by the Swiss government, making it the largest casualty of the current crisis. Investors will likely continue watching the banking sector for indicators of potential weakness.
Conclusion
Overall, First Citizens Bank’s acquisition of Silicon Valley Bank represents a significant consolidation within the US banking sector. By purchasing most of the assets and deposits associated with SVB, First Citizens is positioning itself for future growth and expansion, even as other banks deal with the fallout from recent bank failures.
