First Citizens Bank headquarters in Raleigh, North Carolina on on March 27. First Citizens has acquired failed Silicone Valley Bank and the FDIC agreed to give First Citizens a $16.5-billion discount on $72-billion in loans and a pledge to share any losses (or gains) on those loans in the future.Melissa Sue Gerrits/Getty Images
The fate of Silicon Valley Bank’s Canadian operation is in the hands of its court-appointed liquidator, after the division was left out of First Citizens BancShares Inc.’s takeover of parts of the failed American technology lender.
North Carolina-based First Citizens is buying US$72-billion of SVB’s assets at a discounted price of US$16.5-billion, the U.S. Federal Deposit Insurance Corporation said in a statement Sunday. First Citizens’ chief executive officer, Frank Holding, said during a conference call Monday that the deal does not include the bank’s Canadian business. The sale also excludes SVB’s other global divisions, including one in Germany and a joint venture in China.
Canada’s banking regulator, the Office of the Superintendent of Financial Institutions, moved SVB’s Canadian arm into liquidation on March 15, and PricewaterhouseCoopers Inc. was appointed to oversee the bank’s restructuring in Canada as part of a newly created bridge bank controlled by the FDIC. The shift made it possible for an acquirer to buy SVB’s U.S. and Canadian assets together.
At the time, OSFI said the restructuring process would be carried out in a way that served the interests of creditors while allowing SVB to continue operating in Canada.
“I took this action to affect an orderly transition of the Canadian branch of Silicon Valley Bank to the FDIC bridge bank,” OSFI superintendent Peter Routledge said in a statement on March 15. “I am satisfied that this approach, developed with officials in the United States, is in the best interest of the branch’s creditors.”
OSFI said in an e-mailed statement that PricewaterhouseCoopers is continuing to oversee the transition, and that the Canadian regulator is not actively involved in the process. PricewaterhouseCoopers declined a request for comment. The FDIC did not respond to a request for comment.
First Citizens does not operate in Canada. The bulk of the regional bank’s 550 branches and offices extend across the southeastern U.S. coast from Maryland to Florida. It also has some locations across the Midwest and the West Coast. By taking over SVB, it will add 17 branches, largely in California, and double its assets to US$219-billion.
“We see great promise in extending to the venture and tech spaces in Silicon Valley, building on the expertise and experience we developed through years of supporting North Carolina’s own innovative hub,” Mr. Holding said during the conference call.
Shares of First Citizens soared 55 per cent Monday, leading beleaguered regional bank stocks higher as investor concerns over further fallout from SVB’s failure eased.
U.S. regulators shut down SVB in early March after announcing a proposal to shore up its capital. Investors and clients bristled at the plan, and a run on deposits ensued. The mass exodus forced the bank to take losses on sales of securities that had fallen in value as interest rates spiked.
SVB’s collapse was the largest bank failure in a decade, and it sparked concerns that other lenders could face the same problems.
In Britain, regulators took over SVB’s domestic subsidiary earlier this month. Within days, London-based HSBC Holdings PLC had finalized a deal to buy the subsidiary for £1.
SVB is a much smaller lender in Canada than it is in the U.S. or Britain. Its Canadian division had a licence to lend, but not take deposits. It had $864.1-million in Canadian assets and $435.1-million in outstanding loans as of December. The bank operated at a loss in Canada until 2022, when it reported net income of $4.3-million, according to court documents.
Since SVB opened its doors in the country in 2019, Canada’s biggest banks have bolstered their own tech and innovation financing units to draw business in the sector, which was flourishing prior to a sharp downturn last year. The Globe and Mail previously reported that Royal Bank of Canada, Canadian Imperial Bank of Commerce and Bank of Montreal, which have tech banking units, have quietly been picking up clients and letting them know that the lenders are available to assist companies looking for alternatives.
If clients shift over to other lenders before a deal for SVB Canada is completed, the opportunity to buy its waning loan portfolio could become less attractive.