This news is developing. Please check back here for updates.
First Citizens BancShares missed expectations in third-quarter earnings and lowered its full-year net interest income guidance as costly deposits weigh on the bank's balance sheet.
The Raleigh, North Carolina-based bank said Thursday that slow loan growth and increasing deposits led to a nearly 15% year-on-year drop in its net income, which totaled $639 million in the third quarter. First Citizens also
Chairman and CEO Frank Holding Jr. said in a prepared statement that the bank's loan growth "remained resilient" in its legacy general and commercial bank segments but was
"We posted another quarter of strong financial results, largely in line with our expectations," Holding said.
Third-quarter net interest income of $1.8 billion fell within the bank's prior projections, representing a decline of $194 million from a year ago. But total loans, total deposits and noninterest expenses all missed First Citizens' guidance from the previous quarter.
First Citizens saw earnings per share of $43.42 in the third quarter, below consensus analyst estimates of $45.45, per S&P. Net interest margin — a profitability metric to assess loan yield versus deposit cost — came down to 3.33% in the third quarter from 3.52% the previous year.
The bumpy quarter comes about a year and a half after its acquisition of the failed Silicon Valley Bank last spring. Since buying the Santa Clara, California-based bank's assets, First Citizens has more than doubled in size, hitting $221 billion assets in the third quarter, and seen its stock price rocket. The bank's stock was trading at $2,082.60 before the market opened Thursday.
First Citizens has been poised to jump on the so-called innovation economy — banking venture capital dollars and startup companies — even as the sector goes through its "most significant downturn" since the dot-com boom, said Marc Cadieux in a July interview. Cadieux, a three-decade SVB veteran, was tapped to lead the SVB's commercial banking business under the First Citizens umbrella.
The bank sees the stall in private equity and VC investments as a temporary blip. In Thursday's prepared statement, Holding said he was confident in the prospects of SVB.
"The stability of the SVB deposit franchise continues to demonstrate the competitive advantage we maintain in the innovation economy," he said.
The North Carolina-based bank doubled in size in 2022 and again last year, when it acquired the failed Silicon Valley Bank. It has used consistency to outperform peers.
Jefferies analyst Casey Haire said in a July interview that the interest rate environment has blown some "cyclical headwinds" at the sector, but that for the longer term he's a "huge believer in the innovation ecosystem."
First Citizens landed the No. 1 spot on American Banker's list of top-performing banks this year, due to high return on equity.
As the bank pulls various levers to manage interest income, it is simultaneously working to ratchet its common equity tier 1 capital ratio down to 10.5% by the end of 2025 from 13.28% — roughly where it has hovered since the SVB transaction.
To get there, First Citizens bought back $700 million in stock as part of a previously announced $3.5 billion repurchase plan. The bank also announced a dividend raise to $1.95 per share for the fourth quarter, up from $1.64 sequentially.
