SVB Deal & 3 Other Reasons to Buy First Citizens (FCNCA) Stock

Amid the ongoing regional banking crisis and a potential recession in the near term, investors are shying away from investing in stocks. However, there are a number of stocks worth considering based on strong fundamentals and prospects. One such banking stock is First Citizens BancShares, Inc. FCNCA.

This Raleigh, NC-based bank has recently been in the news because it acquired failed Silicon Valley Bank ("SVB") from the Federal Deposit Insurance Corporation. The company assumed SVB’s assets worth $110 billion, deposits of $56 billion and loans of $72 billion. Thus, the company became one of the top 20 banks in the United States.

The buyout of SVB is by far the biggest challenge for First Citizens BancShares, which has a history of buying failed banks. The deal allows the company to build on its experience with innovation hubs by leveraging SVB's strength in serving the private equity, venture capital and technology sectors.

The deal's profitability can be gauged from FCNCA’s first-quarter 2023 results. The transaction led to a one-time after-tax gain of $9.8 billion, thus resulting in a net income of $9.5 billion in the quarter.

This apart, First Citizens BancShares has provided an upbeat 2023 guidance. Driven by higher rates and cost synergies from the above-mentioned deal, the company projects earnings (excluding acquisition-related charges) to be $150-161 per share.

Management projects net interest income (NII) to be in the range of $6.2-$6.5 billion on the assumption of three interest rate cuts in the second half of the year, which bring the rates to 4.5%. In 2022, NII was $2.95 billion.  

Further, adjusted non-interest income is anticipated to be between $1.62 billion and $1.67 billion, while adjusted non-interest expenses are expected to be in the range of $4.20-$4.30 billion.

Hence, the financially compelling deal is one of the biggest reasons to invest in FCNCA stock for solid returns.

Analysts also seem to be bullish on the company’s prospects. Over the past seven days, the Zacks Consensus Estimate for earnings moved 67.2% and 44.3% upward for 2023 and 2024, respectively. First Citizens BancShares currently sports a Zacks Rank #1 (Strong Buy).

Shares of FCNCA have surged 65.5% over the past three months against the industry's 23.3% decrease.

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Here are the other factors that make FCNCA stock worth betting on:

Synergies From Opportunistic Buyouts: Acquisitions remain a major part of First Citizens BancShares’ business expansion plan and top-line and footprint diversification efforts. Since the 2008 financial crisis, the company has successfully integrated nearly 20 failed banks. The company is not averse to acquiring more regional banks if those complement the existing operations.

Strong Balance Sheet: As of Mar 31, 2023, FCNCA had total borrowing of $46.1 billion and cash and due from banks and interest-earning deposits at banks of $40.1 billion. The company’s issuer grade ratings of BBB/Baa2 from S&P and Moody’s, respectively, render it access to the debt market. Given its earnings strength and a solid liquidity position, the company is expected to be able to continue meeting debt obligations in the near term, even if the economic situation worsens.

Impressive Capital-Deployment Activities: First Citizens BancShares is committed to enhancing shareholders’ value. The company has been raising dividends regularly, with the last one announced in October 2022. The company has raised its quarterly dividend thrice in the last five years. Also, it has a five-year annualized dividend growth of 12.03%. Currently, the company's payout ratio is 4% of earnings.

Other Banks to Consider

A couple of other top-ranked bank stocks worth a look are The Bancorp TBBK and Pathward Financial, Inc. CASH. TBBK currently sports a Zacks Rank #1 and CASH carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The consensus estimate for The Bancorp’s 2023 earnings has been revised 6.5% upward over the past 30 days. Over the past six months, TBBK’s share price lost 1.7%.

Pathward Financial’s 2023 earnings estimates have moved 1.8% north over the past 30 days. CASH’s shares have gained 5.9% over the past six months.

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