More than $ 16.5 billion discount on Silicon Valley Bank acquisition

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More than $ 16.5 billion discount on Silicon Valley Bank acquisition

The collapsed Silicon Valley Bank (SVB) has today been partly taken over by the American First Citizen Bank. The new owners will receive a hefty $16.5 billion discount from the Federal Deposit Insurance Corporation (FDIC) on the purchase of all deposits and loans. In addition, the FDIC shares in any losses on SVB loans.

The collapsed Silicon Valley Bank (SVB) has today been partly taken over by the American First Citizen Bank. The new owners will receive a hefty $16.5 billion discount from the Federal Deposit Insurance Corporation (FDIC) on the purchase of all deposits and loans. In addition, the FDIC shares in any losses on SVB loans. (Pool/ABACA)

But where it seems like a huge risk for First Citizen Bank (FCB), senior equity analyst Jan Wirken of ABN Amro thinks that FCB knows very well what it is doing. “They have a good track record of acquiring banks,” says Wirken. “So they can handle this.”

The size of Silicon Valley Bank – compared to the smaller FCB – therefore does not matter too much. ‘It does have some weight, but it doesn’t really matter,’ says Wirken. This is due to the limited degree of complexity involved in an acquisition. ‘Of course you shouldn’t take over JPMorgan, but with a bank of this size the complexity is manageable.’

Secret Auction

According to Wirken, the risk was well weighed in relation to the purchase by FCB, all the more so because several parties were indeed interested in the remains of SVB. For example, there was a secret auction, and the FDIC decided that FCB’s bid was the winning one. ‘It was carefully looked at, so not as if only one candidate was awarded it.’

‘The takeover has been carefully considered’

John Wirken

Wirken also states that it is a good deal for First Citizen Bank, and that there was little pressure involved in the acquisition. Unlike the acquisition of Credit Suisse by UBS, this acquisition was not subject to pressure from the government.

Good news

The takeover is also good news for the stability of the banking system, says Wirken. “When a bank collapses and a bank run ensues, the one thing people don’t want is to lose money,” he says. “The US government responded quickly and they made sure that no one lost their money. That gives confidence.’


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