Mon, Mar 20, 2023 page11

• First Citizens weighing SVB takeover

  FDIC AUCTION: First Citizens early in the sales process submitted a very low offer for Silicon Valley Bank, which was rejected and counteroffered, anonymous sources said

  • Bloomberg
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  First Citizens BancShares Inc is evaluating an offer for Silicon Valley Bank (SVB), people familiar with the matter said.

  The North Carolina-based lender is among the handful of potential buyers in the data room for the auction process for the failed bank, the people said on the condition of anonymity, adding that offers were due yesterday.

  The US Federal Deposit Insurance Corp (FDIC) was yesterday scheduled to decide whether to pursue a full sale or breakup, depending on whether any bids come in, one of the people said, adding that at least one other suitor is making a serious consideration for Silicon Valley Bank.

  

  A person stands at a door at a Silicon Valley Bank branch office in San Francisco on Monday last week.

  Photo: Reuters

  A final decision has not been made, and First Citizens could opt against making a bid, the people said.

  Silicon Valley Bank collapsed into FDIC receivership earlier this month, after its long-established customer base of tech start-ups grew concerned and yanked deposits.

  First Citizens participated in the FDIC’s sales process earlier for Silicon Valley Bank, submitting a very low bid that was rejected, the people said.

  First Citizens acquired commercial lender CIT Group Inc for more than US$2 billion in a deal that closed last year.

  Meanwhile, a coalition of midsize US banks asked federal regulators to extend FDIC insurance to all deposits for the next two years, arguing the guarantee is needed to avoid a wider run on the banks.

  “Doing so will immediately halt the exodus of deposits from smaller banks, stabilize the banking sector and greatly reduce chances of more bank failures,” the Mid-Size Bank Coalition of America (MBCA) said in a letter to regulators.

  The collapse of Silicon Valley Bank and Signature Bank prompted a flood of deposits out of regional lenders and into the nation’s largest banks, including JPMorgan Chase & Co and Bank of America Corp. Customers spooked by the failures were taking refuge in firms seen as too big to fail.

  “Notwithstanding the overall health and safety of the banking industry, confidence has been eroded in all but the largest banks,” the MBCA said in the letter.

  “Confidence in our banking system as a whole must be immediately restored,” it said, adding that the deposit flight would accelerate should another bank fail.

  The group cited remarks by US Secretary of the Treasury Janet Yellen that the backstops put in place so far would protect uninsured deposits only if regulators found it “necessary to protect the financial system.”

  That is a category unlikely to include the smaller banks represented by the MBCA.

  The expanded insurance program should be paid for by the banks themselves by increasing the deposit-insurance assessment on lenders that choose to participate in increased coverage, the MBCA said.

  The letter was sent to Yellen, the FDIC, the US Comptroller of the Currency and the US Federal Reserve.

  US Deputy Secretary of the Treasury Wally Adeyemo on Friday said that, based on discussions regulators have had with banking executives, deposits at small and medium-sized banks across the country had begun to stabilize, and in some cases “modestly reverse.”

  As the regional banking crisis unfolds, Berkshire Hathaway chairman and CEO Warren Buffett has been in touch with senior officials in US President Joe Biden’s administration in the past few days.

  There have been multiple conversations between Biden’s team and Buffett in the past week, people familiar with the matter said.

  The calls have centered around Buffett possibly investing in the US regional banking sector in some way, but the billionaire has also given advice and guidance more broadly about the current turmoil.

  Buffett has a long history of stepping in to aid banks in crisis, leveraging his cult investing status and financial heft to restore confidence in ailing firms. Bank of America won a capital injection from Buffett in 2011 after its stock plunged amid losses tied to subprime mortgages. Buffett also tossed a US$5 billion lifeline to Goldman Sachs Group Inc in 2008 to shore up the bank following Lehman Brothers Holdings Inc’s collapse.
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