Banking: First Citizen buys all loans, and deposits of collapsed SVB
Virendra Pandit
New Delhi: First Citizens BancShares Incorporation has bought all the loans and deposits of Silicon Valley Bank (SVB) and gave the Federal Deposit Insurance Corporation (FDIC) equity appreciation rights in its stock worth USD 500 million in return, the FDIC said in a statement.
On March 10, startup-focused lender SVB became the largest bank to fail since the 2008 financial crisis, sending jitter through world markets, the media reported on Monday.
Seventeen former SVB branches opened as First Citizen outlets in the US on Monday.
First Citizen acquired about USD 72 billion in SVB assets at a discount of USD 16.5 billion and the estimated cost of SVB’s failure to FDIC’s deposit insurance fund is about USD 20 billion, the FDIC said.
Last week showed financial markets’ stress as Germany’s biggest lender Deutsche Bank also came in the crosshairs, with its shares down 8.5 percent on Friday and the cost of insuring its bonds against default rising sharply.
On Monday, movement of bank shares in Asia was mixed — steady in Australia and Tokyo but slipping in Hong Kong, where Standard Chartered shares fell 4 percent. S&P 500 futures rose 0.5 percent and European futures rose 1 percent.
The collapse of SVB on March 10 reverberated across world markets, sending US depositors fleeing smaller banks for larger ones while the hit to confidence forced Credit Suisse into the arms of rival UBS last week.
In March, the Stoxx index of European bank shares remained down over 18 percent and the US KBW regional bank index lost 21 percent, with investors on edge about what lay in store for them.
The sudden spike in tensions for banks raised doubts about whether major central banks will continue to pursue aggressive interest rate hikes to bring down inflation, and whether tightened lending will hurt the global economy.
In the US, where flows into money market funds increased by over USD 300 billion in the past month to a record USD 5.1 trillion, the focus is on depositors’ confidence in regional lenders — which could take some salve from an SVB sale.
The SVB deal came after weeks of waiting as the FDIC called for separate offers for SVB Private and SVB. SVB is held by SVB Financial Group, which has operations beyond the US across ten countries, including India.
Nearly USD 90 billion in securities still remain with the FDIC for sale.
Until its crash on March 10, the Santa Clara, California-based SVB was the 16th largest bank in the US. Incorporated in 1983, it became a trendsetter and emerged as an early bank to set focus on startups and venture capitalists.
