First Republic's stock rallies as First Citizens deal for Silicon Valley Bank lifts banks

By Steve Gelsi and Barbara Kollmeyer

Bank stocks rise after sharp stock drops in recent weeks that followed the demise of Silicon Valley Bank

Shares of First Republic Bank rallied Monday, leading a swath of regional lenders higher on news that the failed Silicon Valley Bank has a buyer, as well as on upgrades of three banks from analysts in the sector.

The Federal Deposit Insurance Corp. announced earlier on Monday that First Citizens Bancshares Inc. (FCNCA) had entered a deal to assume all loans and deposits of Silicon Valley Bridge Bank, which was created by the FDIC following the closure of Silicon Valley Bank. First Citizens Bancshares' stock rose 53.7% on Monday.

See: First Citizens enters agreement to buy Silicon Valley Bridge Bank, says FDIC

Meanwhile, First Republic's (FRC) stock rose about 12%. Bloomberg reported that U.S. authorities are studying ways to enhance their emergency-lending ability for banks in a way that would buy more time for First Republic to stabilize a drop in deposits.

First Republic had lost 90% of its value in less than two weeks, hitting an all-time low of $12.18 a share last Monday amid jitters around its overlap with Silicon Valley Bank.

Hard-hit bank stocks are snapping back. PacWest Bancorp (PACW) climbed 3.5% and Zions Bancorp (ZION) rose 3.8%. First Horizon Corp. (FHN) moved up by 1.4% and Comerica Inc. (CMA) rose 5.4%.

The KBW Nasdaq Bank Index advanced by 2.5%, the Financial Select Sector SPDR exchange-traded fund (XLF) rose 1.2% and the SPDR S&P Regional Banking ETF (KRE) moved up by 0.9%.

Also Read: Fed raised concerns over SVB risk management as early as 2021, Vice Chair Barr says

Citi on Monday upgraded shares of M&T Bank Corp. (MTB) and KeyCorp (KEY) to buy, saying they offer an attractive risk/reward after an analysis of bank balance sheets. KeyCorp offers the largest benefit from repricing of fixed assets, which will help its profits in 2024 and 2025, Citi analyst Keith Horowitz said.

M&T Bank ranks as a "high-quality play and we see excellent value" for a bank that has peer-leading returns and the strongest capital position, he said.

Shares of KeyCorp rose 5.3%, while M&T Bank advanced by 2.6%.

BankUnited Inc. (BKU) rose 2.5% after Hovde upgraded the stock to outperform and set a fresh price target of $32 a share, saying it offers a "compelling entry point" at current levels.

"Recent conversations with [BankUnited] executive management indicate that deposit outflows have stabilized and, to date, have been centered in non-core segments within the finance/fiduciary verticals ... that were higher cost in nature," Hovde said. "Core relationship funding trends appear to be stable with [BankUnited] seeing inflows over recent days."

Shares of Silvergate Capital Corp. (SI) climbed14.5%.

Silvergate Capital is in the process of winding down operations at its subsidiary, Silvergate Bank, a crypto-friendly institution that got caught up in losses and troubles for the cryptocurrency market in recent months.

That news has has wiped 90% of the value off Silvergate Capital.

The FDIC had been trying to auction off Silicon Valley bank for about two weeks, since it became the largest U.S. bank to go bust since Washington Mutual in 2008.

-Steve Gelsi

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03-27-23 1637ET

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