First Citizens will hold off on buybacks as it integrates SVB

First Citizens BancShares, which is still in the process of absorbing the failed Silicon Valley Bank, will continue to abstain from share repurchases through the end of 2023, bank executives said Thursday.

The Raleigh, North Carolina-based bank said it will focus in the near term on integrating SVB, which it bought from the Federal Deposit Insurance Corp. in March. First Citizens also pointed to pending proposals for capital requirements and said it wants to see how they unfold before deciding on a buyback schedule.

“We want to get more clarity on the proposed impacts of the new capital rules,” First Citizens CEO Frank Holding Jr. said on an earnings call with analysts Thursday. “We’ve developed a team whose mandate is to develop plans to expedite implementation once final rules are established.”


Absent unforeseen challenges, the $210 billion-asset bank said it expects to resume buybacks in 2024. 

Proposed new capital rules for banks unveiled last month have prompted some banks to rethink, or prepare to rethink, their share repurchase strategies. The rule proposed by the FDIC would require many U.S. large banks to meet higher capital standards and would fully go into effect in the second half of 2028.

The beefed-up rules would apply to banks with more than $100 billion of assets, including First Citizens. That approach represents a shift from previous capital rules that placed tougher constraints on banks with at least $250 billion of assets.

First Citizens’ common equity Tier 1 ratio was 13.4% at the end of the second quarter, up notably from its 10.1% level at the end of 2022. The SVB acquisition accounted for much of the increase, while retained earnings from previous quarters also helped boost the ratio, the bank said.

The decision to keep buybacks on the shelf was anticipated by a fair segment of investors, said Brian Foran, co-founder and analyst at Autonomous Research.

“The capital will still be there in 2024, so it feels like a push-out of buyback timing, not a reduction in ultimate potential,” Foran said.

First Citizens assumed $110 billion of assets and $56.5 billion of deposits after Silicon Valley Bank, which was long favored by startup and venture capitalists, foundered. The deal marked the second large acquisition by First Citizens since 2020, when it agreed to buy CIT Group for $2.2 billion

The bank last repurchased shares in 2022. First Citizens spent $1.2 billion on buybacks in the third and fourth quarters of that year, according to regulatory filings.

During the second quarter of 2023, First Citizens reported more charged-off loans, but said it had anticipated much of the increase when it agreed to acquire parts of SVB. The bank’s net charge-off ratio was 0.47% at the end of June, up from 0.13% in the second quarter of 2022.

“We remain encouraged by the resiliency of our clients in the face of rising inflation and elevated interest rates,” Holding said. 

The SVB acquisition ballooned First Citizens’ balance sheet. The bank counted deposits of $141.2 billion in the second quarter, up from $89.4 billion a year ago. Loans and leases nearly doubled, from $70.8 billion in the second quarter of 2022 to $133 billion this year. Total assets increased to $209.5 billion, up from $109.3 billion a year ago.

First Citizens reported net income of $682 million, up from $255 million during the year-ago period, thanks largely to the infusion of Silicon Valley Bank assets. The acquisition also helped boost net interest income to $1.96 billion, up from $700 million last year. At the same time, the bank’s net interest margin rose more than 100 basis points to 4.10%.

The bank said it expects to spend about $650 million more on acquisition costs in connection with the SVB deal, with $380 million coming in the second half of 2023 and the remainder in 2024. Noninterest expenses totaled $1.57 billion in the second quarter, up from $745 million during the same period last year.

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