First Citizens Bank, the U.S. bank that bought a majority stake in Silicon Valley Bank after its collapse, reported a more than 30-fold jump in profits in the first three months of 2023, fueled by its acquisition of the failed bank. Bank of California.
First Citizens said Wednesday that first-quarter net income totaled $9.5 billion, or $653.64 a share, up from $264 million, or $16.70 a share, a year earlier, as its SVB deal brought in $9.8 billion. dollar earnings.
The windfall made First Citizens the second-most profitable bank in the U.S. during the quarter, behind JPMorgan Chase & Co, which posted a profit of $12.6 billion.
In a conference call with analysts, Chief Executive Frank Holding described the SVB acquisition as a “financial home run.” Shares of First Citizens rose nearly 7% in early Wednesday trading in New York after hitting record highs earlier in the day.
Adjusted for gains from the SVB deal, First Citizens’ net income was $306 million, flat year-over-year and above expectations for $292.8 million, according to data compiled by Bloomberg.
In March, First Citizens bought the failed bank’s $72 billion loan portfolio at a roughly 20% discount and assumed tens of billions of dollars in deposits. It also has a loss-sharing agreement with the FDIC on commercial loans extended by SVB.
The deal doubled First Citizens’ assets to more than $200 billion, taking it from the 30th largest US bank to the top 20.
U.S. banks posted a record first-quarter profit of about $80 billion, up 33% year-on-year, largely driven by banking turmoil and rising interest rates. About half of the industry’s overall profit growth came from the one-time gains recorded by First Citizens and Flagstar, which acquired Signature Bank.
One of the challenges for North Carolina-based First Citizens was convincing SVB’s employees and clients that East Coast Bank could provide the same support for the technology and life sciences industries.
HSBC last month hired more than 40 commercial bankers who had worked at SVB from First Citizens.
First Citizens also revealed that deposits in SVB’s traditional business have fallen to about $41 billion from $56 billion at the time of the transaction, but withdrawals have now stabilized.
Peter Bristow, president of First Citizens, told analysts: “We continue to focus on customer outreach, and I believe some of the traditional SVB customers will transfer business to us as depositors realize that their deposits It’s safe at First Citizens.”