First Citizens Bancshares: A Strong Commercial Lending Franchise And SVB Recovery Are Positives

Core Insights - First Citizens BancShares has outperformed expectations with a 13% beat on core earnings in Q2, despite a 5% year-over-year revenue decline [2] - The bank's net interest income fell 7% year-over-year but showed slight sequential improvement, contributing to the overall earnings beat [2] - The acquisition of Silicon Valley Bank (SVB) has positioned First Citizens favorably, with a 5% quarter-over-quarter increase in deposits and a strong franchise value among venture capital managers [3] Financial Performance - Core earnings exceeded expectations by approximately 13%, with pre-provision profits beating by over 4% [2] - Core fee-based income rose about 4% year-over-year, while leasing-based rental earnings increased by 11% year-over-year [2] - The bank's tangible book value per share grew by 15% year-over-year, and the CET1 ratio stood at 13.3% [2] Market Position and Strategy - First Citizens is expected to leverage its commercial lending capabilities, which are difficult for other regional banks to replicate, to drive long-term growth [5] - The bank's Net Promoter Score improved from 42 to 45, indicating strong customer service relative to peers [4] - The ongoing recovery of the IPO and venture capital markets is anticipated to enhance deposit inflows and support lending growth [3] Future Outlook - Long-term core earnings growth is projected at close to 6%, with a strong rebound expected in FY'26 [4] - The fair value of the bank's shares is estimated at around $2,450, supported by a 12x multiple on FY'25 EPS estimates [4] - The bank is likely to return capital through buybacks as it aims for a CET1 ratio of 10.5% [4]