Mixed Markets On Wall Street, Banks Rebounded

Barry Adams
27 Mar, 2023
New York City

Major averages on Wall Street looked past stress in the regional banking sector and extended gains of the previous week. 

Financial regulators stepped up activities and quickly found a buyer for the assets of the Silicon Valley Bank, but at a sharply discounted price and terms favorable to the buyers. 

In addition, regulators focused on providing more liquidity to regional banks, including Firth Republic Bank with a business model similar the SVB.    

In the past, when a bank is in trouble, banking peers rapidly swoon in and scoop up assets of the troubled bank, but banks of all sizes are showing significant restraint, highlighting looming losses in bank's assets and economic uncertainty. 

The FDIC managed to sell about 40% of the total assets of the former Silicon Valley Bank for about 25% of its nominal value and entered into a loss sharing arrangement with the acquiring bank First Citizen BancShares. 

Treasury yields edged slightly higher as investors hoped that swift actions from regulators may provide additional stability to the banking system.  

 

Indexes & Yields 

The S&P 500 index increased 3.45 points to 3,974.15 and the Nasdaq Composite index declined 28.31 points or 0.3% to 11,793.23. 

The yield on 2-year Treasury notes increased 15 basis points to 3.93%, 10-year Treasury notes inched up 10 points to 3.43% and 30-year Treasury bonds 5 basis points to 3.70%. 

Gold edged down $20.32 to $1,956 an ounce, after trading at a one-year high of $2,000. 

Crude oil increased $1.66 to $70.96 a barrel and natural gas futures declined 12 cents to $2.08 a thermal unit. 

 

US Movers

First Citizens BancShares Inc soared 47% to $854.49 after the North Carolina-based bank agreed to acquire Silicon Valley Bank's assets from the FDIC. 

First Citizens agreed to pay $16.5 billion for $72 billion of assets (or loan portfolio), own and operate 17 branches of the former bank, the FDIC said in a statement. 

The FDIC will retain $90 billion of assets of the now defunct Silicon Valley Bank and the agency received stock appreciation rights potentially worth $500 million in the First Citizens BancShares, Inc.  

The FDIC-controlled Silicon Valley Bank Bridge Bank, National Association will reopen as First-Citizen Bank & Trust Company, a wholly-owned subsidiary of First Citizens BancShares.  

 The FDIC estimated the cost of the failure of Silicon Valley Bank to be approximately $20 billion and the exact cost will be determined once the receivership is terminated. 

The FDIC and First–Citizens Bank & Trust Company entered into a loss–share transaction on the commercial loans it purchased from the former Silicon Valley Bridge Bank, National Association.  

The FDIC as receiver and First–Citizens Bank & Trust Company will share in the losses and potential recoveries on the loans covered by the loss–share agreement.

First Republic Bank jumped 14% and PacWest Bancorp advanced 4% after Bloomberg News reported that the U.S. government is looking to provide additional liquidity to regional banks as the government and agencies search for a buyer for Firth Republic Bank.