First Citizens draws 'buy' rating after bulking up from purchase of Silicon Valley Bank

By Steve Gelsi

Goldman Sachs initiates coverage of North Carolina-based bank, now ranked as the 16th-largest in the U.S.

First Citizens BancShares Inc. drew a buy rating from Goldman Sachs on Thursday as analysts said the large regional bank is well-positioned to deliver returns in the low-to-mid teens over time.

Now ranked as the 16th-largest U.S. bank with assets of $213.6 billion, Goldman Sachs initiated coverage of the Raleigh, N.C.,-based lender with a price target of $1,950 a share.

First Citizens BancShares trades under the symbol (FCNCA) and operates four main lines of business: general bank, commercial, SVB and railcar leasing.

The SVB business includes the remnants of Silicon Valley Bank, which it acquired in a distressed sale by the U.S. government last year.

Goldman Sachs analyst Ryan M. Nash said the SVB unit is coming back to life after a pause in its banking activities, which often involve financing deals for private-equity and venture-capital firms.

That business had been growing at about 17% a year between 2017 and 2022.

"Additionally, after pausing new deals following the acquisition, more recently [SVB] has come back to the market and is seeing a strengthening loan pipeline that should drive increased growth in global fund banking," Nash said.

Nash also cited the bank's loan growth, which is above its peers, as part of his buy rating on the stock.

The loan growth will in turn boost net interest income, particularly if bank interest rates remain higher for longer this year, he said.

First Citizens BancShares is also working to control costs, even as it maintains a stronger balance sheet than others, with ample capital for stock buybacks.

Nash's target price of $1,950 a share for First Citizens BancShares reflects a price-to-earnings ratio of 9.5 times his 2025 projection for earnings per share. The price target also amounts to 1.2 times Nash's year-end 2025 tangible book value of $1,653 per share.

First Citizens BancShares stock rose 2.1% to $1,613.63 on Thursday, as the broader market moved up and bank stocks advanced.

Also read: Fed's interest-rate decision makes bank stocks more attractive: analyst

On March 27, 2023, First-Citizens Bank & Trust Co., a subsidiary of First Citizens BancShares, said it won a competitive auction held by the Federal Deposit Insurance Corp. to purchase out of FDIC receivership all loans and other assets, and assume all customer deposits of Silicon Valley Bridge Bank, N.A. The bridge bank was formed by the FDIC after Silicon Valley Bank failed on March 10, 2023.

Silicon Valley Bank went bust from a run on deposits a year ago after 30 years of lending to venture-capital firms and wealthier individuals. It was the largest bank failure since the global financial crisis, and the second-biggest ever at the time.

Also read: Silicon Valley Bank branches closed by regulator in biggest bank failure since Washington Mutual

-Steve Gelsi

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03-21-24 1626ET

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