Last updated at 7:39 a.m., EST
Shares of the Raleigh, North Carolina-based First Citizens BancShares (NASDAQ:FCNCA) soared by more than 20% in pre-market trading on Monday after the Federal Deposit Insurance Corporation (FDIC) said that FCNCA is buying all of the $56 billion in deposits and $72 billion in loans of failed lender Silicon Valley Bank (SVB). The deal also includes 17 legacy branches of SVB, which will start functioning under the new name on March 27. Following the news, shares of First Citizens are up 10.5% in pre-market trading as of the last check.
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First Citizens is buying the said deposits at a discount of $16.5 billion, while $90 billion of the collapsed bank’s securities will remain in the FDIC’s receivership. Moreover, the FDIC has agreed to partake in some of the gains and/or losses arising from SVB’s commercial loans. The estimated total loss to the FDIC from SVB’s failure will roughly amount to $20 billion, the regulator added.
The deal will bump FCNCA’s status up to the 25th largest U.S. bank list based on asset size, from the current top-30 list. First Citizens has bought over 20 failed banks with the assistance of the FDIC since 2009. As of December 31, 2022, FCNCA had $109.30 billion in total assets and $89.41 billion in total deposits.
Commenting on the deal, Frank Holding Jr. CEO of FCNCA said, “This has been a remarkable transaction in partnership with the FDIC that should instill confidence in the banking system.” The deal indeed restores faith in the U.S. banking system with the aid of federal regulators, who are trying to avert a 2009 financial contagion.
Two Banks Contest to Buy Silicon Valley (last updated at 2:18 a.m. EST)
Two regional banks, namely, Valley National Bancorp (NASDAQ:VLY) and First Citizens BancShares, have made compelling bids to the Federal Deposit Insurance Corporation (FDIC) to buy collapsed Silicon Valley Bank.
As per a Bloomberg report, the FDIC has asked for separate offers for buying SVB’s private arm as well as the entire bank. The details of the bids made by both banks are not disclosed, and the FDIC is not bound to select an acquirer from only these two.
The regulator could decide to hold onto SVB for some more time if the bids are not sweet enough. As per prior reports, Customers Bancorp (NYSE:CUBI) was also mulling a full or partial SVB deal.
Is Valley National a Buy, Hold, or Sell?
Valley National has a current market capitalization of $4.73 billion, almost half that of FCNCA. On TipRanks, VLY stock has a Moderate Buy consensus rating based on two Buys versus three Hold ratings.
Also, the average Valley National Bank stock prediction of $12.90 implies 38.4% upside potential from current levels. Meanwhile, amid the banking sector turmoil, VLY stock has lost 16.6% so far this year.
What is the Price Target for FCNCA?
With one Hold and one Sell rating, FCNCA stock has a Moderate Sell consensus rating on TipRanks. Moreover, the average First Citizens BancShares price target of $681.50 implies a nearly 17% upside potential from current levels.
Year to date, FCNCA stock has lost 22.4%, owing to the banking crisis. Despite that, FCNCA is a bigger bank compared to VLY, with a market capitalization of $8.42 billion.
