Investors are heaving a sigh of relief, and it’s all about the banks.
First Citizens’ purchase of SVB’s assets was a bargain in monetary terms. More crucially, it signaled to markets that, despite SVB’s financial difficulties, there was still value in SVB’s reputation and relationship with its clients. There’s hope, then, of reviving a dead bank — something that can happen only in an environment conducive to such miraculous feats.
Another troubled bank, First Republic, rallied after it was reported that U.S. authorities were considering giving the bank more time to shore up its liquidity. It might not need much more time, not only thanks to the $30 billion deposit promised to it by a coalition of banks, but also because the outflow of deposits from smaller banks to larger institutions has slowed in recent days, as sources Hugh Son.
And beleaguered KeyCorp, which tanked about 60% since the start of the banking turmoil, has a chance of surging 68.6%, according to Citi, which upgraded KeyCorp to buy from neutral.
The optimism was reflected in the SPDR S&P Regional Banking ETF (KRE), which rose about 0.87%. Major indexes — with the exception of the Nasdaq Composite (more on that in a moment) — closed the day in the green too. The Dow increased 0.6% and the S&P inched up 0.2%. The Nasdaq Composite, however, fell 0.5%.
Technology shares, which posted sterling gains as banks struggled the past two weeks, are now facing difficulties of their own. Alphabet slid 2.83%, Apple lost 2.8% and Meta fell 1.5%. Charles Schwab’s Liz Ann Sonders noted the S&P 500 information technology sector’s valuation, relative to the performance of the companies, has risen more than 30%. That’s not a sign we’re back in the pandemic days of sky-high tech valuation, but it’s something to keep an eye on as the banking crisis (hopefully) gets contained.
At the opening bell Monday, shares of midsized banks like Keycorp, Zions and First Horizon rose 8 percent. First Republic Bank, which received a $30 billion rescue package from 11 of the biggest banks in the country as it teetered in the wake of the Silicon Valley collapse, jumped 23 percent.
Customers of SVB will automatically become customers of First Citizens, which is headquartered in Raleigh, North Carolina. The 17 former branches of SVB will open as First Citizens branches Monday, the FDIC said.
European shares opened higher Monday, with German lender Commerzbank AG up 2.4 percent and BNP Paribas up 1.2 percent. Anxiety over contagion in the banking sector quickly spread to Europe this month and regulators there brokered a takeover by UBS of troubled Swiss bank Credit Suisse.
The combined bank
North Carolina-based First Citizens — offers general banking services through more than 550 branches and offices in 23 states — was about half the size of SVB at the end of last year. With assets of $109 billion as of December 31, First Citizens was the 30th largest US bank according to the Federal Reserve.
SVB, by contrast, had assets of $209 billion at that time and was the nation’s 16th largest bank. In the wake of its collapse regulators had transferred SVB’s deposits and loans to a bridge bank.
With the purchase of most of SVB’s business, First Citizens will now be slightly larger than SVB had been before its collapse, with an estimated $219 billion in assets.
As part of the deal, First Citizens is not taking on most of the $90 billion in US Treasuries that SVB was holding when regulators took over. It was the drop in value of those bonds — rather than losses on the loans that SVB had made — that created problems for SVB and the overall banking system.
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