First Citizens ‘ acquisition of Silicon Valley Bank will be fruitful for the bank’s stock, according to Atlantic Equities. The firm initiated coverage of First Citizens BancShares on Wednesday with an overweight rating and a $1,775 per share price target. Atlantic Equities’ forecast implies nearly 50% upside from Tuesday’s close of $1,183.76. FCNCA YTD mountain First Citizen’s stock has climbed more than 56% this year. Analyst John Heagerty highlighted the acquisition of Silicon Valley bank as a potential catalyst for the stock’s growth, and noted the purchase “provides clear scale benefits and geographic diversification.” The firm acquired SVB’s assets earlier this year. “The SVB acquisition has transformed FCNCA’s operations both in terms of the strategic benefits and the financial upside,” he noted. “With a combination of an attractive valuation, the strong likelihood of a supportive buyback in 2024 and an under-appreciated business model, we initiate with an Overweight rating.” “More impressively, the $13bn profit on purchase results in a doubling of NII [net interest income] and TBVPS [tangible book value per share] and we calculate adj. EPS accretion of 80-90% while maintaining CET1 [common equity tier 1] at 13.4% and Tier1 leverage at 9.5% at 2Q23E,” Heagerty said. Heagerty added that First Citizens could also benefit from better capital management as well as higher interest rates over a longer period of time, both factors that could lead to more than 20% upside to Atlantic Equities’ full-year 2025 earnings outlook. Still, the acquisition could prove risky, Heagerty added, with potential downside headwinds including deposit outflows and greater exposure to the commercial real estate market. Shares of First Citizens BancShares have been on fire this year despite the regional banking crisis that took place in March, rising 56.1%. — CNBC’s Michael Bloom contributed to this report.
