Topline
First Citizens Bank has agreed to acquire Silicon Valley Bank and assume control of all its deposits and loans, the company announced early on Monday, a deal that comes weeks after the Federal Deposit Insurance Corporation failed to find a buyer in an earlier auction.
Key Facts
As part of the deal, the North Carolina-based First Citizens Bank has agreed to purchase $72 billion worth of SVB’s assets at a $16.5 billion discount from the FDIC.
The deal will also see First Citizens Bank take control of $56 billion in deposits, the lender said in its own statement.
Starting Monday, 17 legacy branches of Silicon Valley Bank will begin operating as “Silicon Valley Bank, a division of First Citizens Bank,” however, there will be no immediate changes to customer accounts.
The FDIC said it will continue to retain receivership of around $90 billion worth of SVB’s assets—including securities.
The federal agency will also receive equity appreciation rights in First Citizens’ stock worth up to $500 million.
Big Number
$20 billion. That is the amount that the Silicon Valley Bank’s failure will cost FDIC’s Deposit Insurance Fund, the agency estimated.
What To Watch For
Markets appear to have reacted positively to deal, with the London Stock Exchange’s FTSE 100 index opening nearly 1% in the green while the Eurozone’s Euro Stoxx 50 Index was up more than 1% on Monday morning, local time. In the U.S., the S&P 500 Futures was up 0.4% while Dow and Nasdaq Futures rose 0.4% and 0.2% respectively in the early hours of Monday.
Key Background
Earlier this month, federal regulators were forced to step in and take over Silicon Valley Bank to ensure that all deposits at the bank—including those not covered by the FDIC—are safe after the bank dramatically collapsed following a bank run. With total assets worth $209 billion, SVB’s sudden collapse was the second biggest bank failure in U.S. history, raising fears of a wider contagion across the banking sector. During the same week, New York-based crypto-focused lender Signature Bank also collapsed and was taken over by federal regulators. Last Sunday, New York Community Bancorp inked a deal to acquire Signature Bank and its assets worth $38 billion in assets at a discount of $2.7 billion.
Further Reading
First Citizens Buys Silicon Valley Bank After Run on Lender (Bloomberg)