First Citizens makes huge gain on Silicon Valley Bank deal

First Citizens Bank, the US lender that acquired much of Silicon Valley Bank following its collapse, reported a more than 30-fold increase in profits for the first three months of 2023, benefiting from its purchase of the failed California-based lender.

For the first quarter, First Citizens said on Wednesday that net income totalled $9.5bn, or $653.64 a share, up from $264mn, or $16.70 a share, in the same period last year, due to a $9.8bn gain from its deal for SVB.

The windfall made First Citizens the second-most profitable bank in the US during the quarter, just behind JPMorgan Chase that earned $12.6bn.

Adjusted for this gain, First Citizens’ net income was $306mn, unchanged from a year earlier and ahead of forecasts for $292.8mn, according to data compiled by Bloomberg.

In March, First Citizens acquired the failed bank’s $72bn loan portfolio at a roughly 20 per cent discount and assumed $56bn in deposits. It also entered into a loss-sharing agreement with the Federal Deposit Insurance Corporation for commercial loans made by SVB.

The deal doubled First Citizens’ assets to more than $200bn, taking it from the US’s 30th largest bank into the top 20.

Profits in the US banking sector reached a record of roughly $80bn in the first quarter, up 33 per cent from a year ago, driven largely by the banking turmoil as well as higher rates. About half of the increase in the industry’s aggregate profits came from one-time gains recorded by First Citizens and Flagstar, which bought Signature Bank.

One of the challenges for North Carolina-based First Citizens has been to convince SVB’s roster of clients that an east coast bank will be able to provide the same sort of support to the tech and life science industries.

Chief executive Frank Holding said in a statement that the bank had “made strides to integrate our two companies, including meaningful engagement with key Silicon Valley Bank leaders and clients” since closing the deal in March.

Shares in First Citizens, which are up 44 per cent year to date, were up 4 per cent in pre-market trade.