U.S. mid-tier lenders gain on SVB deal, hopes of more govt. support

Illustration shows First Citizens BancShares logo
First Citizens BancShares logo is seen in this illustration taken March 19, 2023. REUTERS/Dado Ruvic/Illustration

March 27 (Reuters) - Shares of several mid-tier U.S. lenders rose sharply on Monday after a buyer emerged for large chunks of embattled Silicon Valley Bank's deposits and loans, which helped inject some calm into fragile markets.

SVB was the largest bank since the 2008 financial crisis to collapse when California regulators closed it on March 10, sparking a major turmoil in the global banking sector.

Market worries eased on Monday as First Citizens BancShares (FCNCA.O) agreed to a deal in which unit First–Citizens Bank & Trust Company will assume SVB assets of $110 billion, deposits of $56 billion and loans of $72 billion.

It also included the lender's purchase of about $72 billion of SVB assets at a discount of $16.5 billion, the Federal Deposit Insurance Corporation, which is acting as the receiver, said.

The new assets acquired by First Citizens would add 55% to its book value per share and 30% to its earnings per share, KBW estimates.

Shares of First Citizens surged 42%, lifting other U.S. lenders as well.

"There is relief that First Citizen Bank, one of America's largest family-controlled banks, has come to the rescue," said Susannah Streeter, head of money and markets at Hargreaves Lansdown.

"A calm of sorts has descended on the banking sector but hopes that this move will see significant stability return may be short-lived."

Investors are keeping a close eye on First Republic Bank (FRC.N) as the beleaguered lender attempts to strike potential deals after losing 90% of its market value so far this month.

Its shares jumped 23% after a report said U.S. authorities were considering more support for banks, which could give the embattled regional lender more time to shore up its balance sheet.

Shares in Keycorp (KEY.N) rose 8.4% and Western Alliance (WAL.N) 8% and Pacific West Bancorp 11.6%. Major U.S. banks JPMorgan Chase & Co (JPM.N), Citigroup (C.N) and Bank of America (BAC.N) also advanced between 1.8% and 4.2%.

Stuart Cole, head macro economist at Equiti Capital, said report of more potential support by the U.S. government is good news. "If such a facility had already been in place, perhaps SVB would not have gone under," he said.

European banking shares (.SX7P) also rose 1.6% as the SVB deal eased some anxiety in the sector following a 3.8% tumble on Friday on worries around Deutsche Bank (DBKGn.DE).

Reporting by Joice Alves in London; Additional reporting by Medha Singh and Amruta Khandekar in Bengaluru; Editing by Amanda Cooper, Toby Chopra and Arun Koyyur

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