First Citizens is retaining SVB clients, but cites ‘headwinds’ to growth

Ten months after acquiring a significant portion of Silicon Valley Bank, First Citizens BancShares says it continues to retain and win back some of the failed bank’s former customers and also stabilize its deposit base, whose remarkably swift erosion last spring led to SVB’s collapse.

On Friday, executives at First Citizens — which doubled in size after the acquisition — ticked off several positives. For starters, the integration work should be finished this year, including a systems conversion of the acquired segment’s private bank that’s set to take place in the first quarter.

In addition, the loan pipeline for Silicon Valley Bank’s global fund banking unit, which serves private equity and venture capital funds, grew by about 40% during the fourth quarter, a result of  attracting new and retaining existing customers, executives said. The SVB unit’s deposit base has been largely stable since April, it added 60-plus primary operating business clients between April and November, and deposits should see “modest growth” going forward, executives noted.

But there are still “headwinds” within the innovation economy that may prove to be challenging for the Silicon Valley Bank segment, they told analysts during First Citizens’ fourth-quarter earnings call.

Despite the “strong pipeline” in global fund banking, growth will continue to be “pressured” due to the ongoing slowdown in private equity and venture capital, Chief Financial Officer Craig Nix said. The company also expects “a modest decline” in technology and health care banking stemming from a reduction in venture capital fundraising and line draws as well as increased loan payoffs, he said.

While First Citizens is “very encouraged” about the coming year, there are challenges, acknowledged Marc Cadieux, president of Silicon Valley Bank’s commercial banking business.

“The innovation economy continues to go through … its own downturn,” Cadieux said on the call. We expect that’s going to continue in 2024. So our intention is to keep doing what we were doing in 2023 and hoping that 2025 and ahead [are] better.”

First Citizens, which now has $213.8 billion of assets, acquired substantially all Silicon Valley Bank’s loans and certain other assets from the Federal Deposit Insurance Corp., which acted as a receiver for Silicon Valley Bridge Bank. First Citizens decided last year to keep the Silicon Valley Bank name and brand, operating it as a division of the larger company.

In September, First Citizens launched a nationwide advertising campaign, calling it “Yes, SVB,” to raise awareness of Silicon Valley Bank’s presence and show that it is “open for business.”

The company reported fourth-quarter net income of $514 million, which was double its pre-merger total of a year earlier but fell 32% from the third quarter. Earnings per share of $34.33 fell short of the average estimate of $48.60 from analysts surveyed by FactSet Research Systems.

There were several notable items in the quarter, including $116 million of acquisition-related charges as well as a Federal Deposit Insurance Corp. special assessment of $64 million.

Noninterest expenses totaled nearly $1.5 billion, compared to $1.4 billion for the third quarter. Net charge-offs were $177 million, representing 0.53% of average loans, the same as the third quarter.

Net charge-offs are expected to be “elevated” this year in the innovation, general office and equipment finance portfolios, the company said. 

The company has “taken proactive steps to help limit losses,” Nix said on the call.

First Citizens confirmed Friday that it plans to buy back shares in the second half of this year, pending regulatory approval. The company halted repurchases last year.