First Citizens Bank has made another large acquisition, purchasing Silicon Valley Bank (SVB). This move is set to boost the bank’s growth potential in the technology industry. Customers of SVB will now become customers of First Citizens as a result of the acquisition. The deal was welcomed by investors, as First Citizen’s shares increased by 52%.
Setting a New Norm for Growth Potential
According to sources, the acquisition could lead to a ‘cultural opportunity’ for First Citizen, allowing them to establish a ‘new norm’ that focuses on growth potential. Banking volatility is expected to be a hot topic at Venture Connect 2023. Conventional banks in North Carolina have not been participating in the startup innovation ecosystem, and there is a need for a bank that is friendlier to startup entrepreneurs. The acquisition could help fill this void and be an example of how the Triangle is replacing Silicon Valley as the next big tech hub.
Impact on Banking Crisis
The sale of Silicon Valley Bank’s deposits and loans by regulators had significant impacts on other lenders in the US banking sector, including First Citizen Bancshares (FCNCA). FCNCA purchased the deposits and loans of Silicon Valley Bank, resulting in its shares rising by 54%. Other troubled lenders such as First Republic (FRC) saw their shares rise by 12% as they contemplated options to stabilize their situation. Even PacWest Bancorp (PACW) and Western Alliance Bancorp (WAL) saw their stock prices increase after being pressured by the failure of Silicon Valley Bank.
Senate Banking Committee’s Hearing on Banking Crisis
The failures of Silicon Valley Bank and New York’s Signature Bank were examined at a Senate Banking Committee hearing. The FDIC’s handling of Silicon Valley Bank auction was also scrutinized, particularly regarding questions about the sale of $72 billion in loans to First Citizens. The FDIC sold these loans at a discount of $16.5 billion, while agreeing to share any future losses or gains on them. The government provided intervention to control the banking crisis, initially covering all depositors at Silicon Valley Bank and New York’s Signature Bank and freeing up more liquidity at the Federal Reserve.
First Citizens Bank’s Expansion Plans
First Citizens Bank has been expanding nationwide via opportunistic acquisitions since the 2008 financial crisis. The bank has grown significantly thanks in part to a series of over 20 FDIC-assisted acquisitions of small failed banks, and they have doubled in size with their acquisition of Silicon Valley Bank. The Holding family orchestrated this growth, collectively owning about 20% of First Citizens’ stock and having close to 50% voting power, with a cumulative stake worth $2.7 billion.
First Citizens Bank has acquired other banks as well, including New York-based CIT Group, which was their largest purchase before SVB. The bank’s location in the fast-growing Southeast, Research Triangle Park, California, and the Northeast has helped its growth across multiple regions in North America. The Holding family is involved in other sectors such as healthcare, farming, and real estate, giving them further influence outside of banking.
In conclusion, First Citizen’s acquisition of Silicon Valley Bank is set to accelerate its growth potential in not only the tech industry but across other sectors as well. With the combined expertise of both banks, they can establish a ‘new norm’ that focuses on growth potential while filling the void left by conventional banks that have not been participating in the startup innovation ecosystem.
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