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On Tuesday, Keefe, Bruyette & Woods reiterated an Outperform rating on First Citizens BancShares (NASDAQ:FCNCA) with a steady price target of $2,500.00. The firm highlighted the recent termination of the FDIC loss share agreement related to the SVB transaction, noting that it has no impact on the capital of FCNCA but does alleviate some reporting and cost burdens.
The termination of the loss share agreement was a strategic move by FCNCA, as the conditions for sharing losses with the FDIC, which would require losses to exceed $5 billion, have not been met. This change also follows a pattern for FCNCA, which has ended similar agreements from past FDIC-assisted transactions.
Analysts at Keefe, Bruyette & Woods pointed out that the share price pullback offers an opportunity for FCNCA to buy back more shares, thus optimizing its excess capital position. The company's stock is currently trading at 1.06 times its tangible book value per share, which the firm views favorably.
In their review of FCNCA's buyback strategy, Keefe, Bruyette & Woods assumes a significant $3.3 billion in buybacks for the year 2025, which would reduce the share count by 11%. Despite this aggressive buyback plan, the firm's projections keep the adjusted Common Equity Tier 1 (CET1) ratio at a comfortable 11.5%, which is 50 basis points above FCNCA's target range.
The firm also noted that the assumed purchase price for the buybacks, ranging from $2,200 to $2,350, is well above the current stock price, which has been affected by recent market downturns. This scenario would allow the company to acquire more shares at a lower valuation, specifically at 1.06 times the projected fourth quarter 2024 tangible book value per share, aligning with management's focus on tangible book value per share growth.
In other recent news, First Citizens BancShares has made several significant moves that have caught the attention of investors. The company announced the early termination of its loss-sharing agreement with the Federal Deposit Insurance Corporation (FDIC), which was initially set in place following the acquisition of certain assets from Silicon Valley Bridge Bank, N.A. This decision reflects First Citizens' assessment that the likelihood of incurring substantial losses under the agreement is minimal. Additionally, First Citizens BancShares issued $1.25 billion in new debt securities, consisting of $500 million in senior notes and $750 million in subordinated notes, as part of its strategy to enhance its capital structure.
Analyst firms have also provided updates on First Citizens BancShares. Piper Sandler upgraded the stock from Neutral to Overweight, citing potential strategic moves in response to recent stock performance and a favorable valuation compared to industry peers. DA Davidson maintained a Neutral rating but highlighted potential benefits from asset sensitivity and capital returns, while expressing caution about rising operational expenses. Truist Securities raised its price target for First Citizens to $2,384, maintaining a Hold rating, based on expectations of higher net interest income and lower adjusted expenses. These developments indicate a focus on strategic financial management and potential growth opportunities for First Citizens BancShares.
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