First Citizens Targets $9.500 Billion Profit from Silicon Valley Bank Purchase

First Citizens Bank appears as one of the big winners of the banking crisis that shakes the regional entities of the United States. The century-old North Carolina entity, a family bank of agricultural origin, dared to buy the remains of Silicon Valley Bank after its bankruptcy. The market received the operation well. First Citizens shares have more than doubled in value since mid-March. In addition, the purchase has meant that an accounting profit is pointed out thanks to which it has closed the first quarter with a profit of 9,504 million dollars (about 8,700 million euros), multiplying by 39 the profits of the same period last year.

The bank's chairman and CEO, Frank B. Holding Jr., 61, negotiated with the deposit guarantee fund all kinds of hedges against lawsuits, litigation or unforeseen losses in the loan portfolio. To avoid risks, it left out of the operation the cryptocurrencies and the branch in the Cayman Islands. And for the accounts to come out, the assets were left with a discount of 16,450 million euros and generous public financing.

In calculating the results of the first quarter, First Horizon has accounted for the transaction: "As a result of the acquisition, net income includes a preliminary gain on the acquisition of $9.820 billion (net of tax), a provision for losses on loans and leases acquired not impaired on acquired loans of $462 million and a provision for unfunded commitments of $254 million," explains in the documentation filed with the Securities and Exchange Commission (the SEC, for its acronym in English).

Adjusted net profit was $292 million versus $292 million in the first quarter of 2022. The entity that has bought the SVB has multiplied by five its size in three years through acquisitions.

With those profits of 9,504 million dollars, First Citizens has become the second bank with the highest profits in the first quarter of the year, only behind JP Morgan Chase. The profits of the largest financial institution in the United States soared 52% in the first quarter, to 12,622 million dollars (about 11,400 million euros at current exchange rates), according to results published in mid-April.

If the aggregate results of the sector take into account the extraordinary profits of those who have been left with the intervened banks, but do not take into account the losses that entail the bankruptcy of entities such as Silicon Valley Bank or the Signature Bank, the banks would have obtained record profits in the quarter. But leaving out those losses offers a misleading picture.

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