(Adds First Citizens' statement in paragraphs 4 and 19)
By Anirban Sen and Renju Jose
March 27 (Reuters) - A buyer for large chunks of Silicon
Valley Bank's deposits and loans helped cast an uneasy calm over
fragile markets on Monday, which have been roiled by worries of
a credit crunch and systemic bank stress.
First Citizens BancShares Inc bought all the loans
and deposits of SVB and gave the Federal Deposit Insurance Corp
equity appreciation rights in its stock worth as much as $500
million in return, the FDIC said in statement.
Seventeen former SVB branches will open as First Citizen
branches on Monday. First Citizen acquires about $72 billion in
SVB assets at a discount of $16.5 billion and the estimated cost
of SVB's failure to FDIC's deposit insurance fund is about $20
billion, the FDIC said.
North Carolina-based First Citizens said in a statement it
did not buy other assets or debts of SVB Financial Group, the
former parent company of Silicon Valley Bank.
The deal has given markets some respite as it was the first
weekend in several weeks that did not bring news of fresh
banking collapses, rescue deals or emergency help from
authorities to shore up confidence.
"You sweep Silicon Valley off to another buyer, which is
good, but the bigger issue is guaranteeing deposits at all those
other (regional) banks," said IG Markets analyst Tony Sycamore
in Sydney.
"It's a little bit of calm before the next storm."
Last week ended with indicators of financial market stress
flashing and Germany's biggest lender Deutsche Bank in the crosshairs, with its shares down 8.5% on Friday and the
cost of insuring its bonds against default up sharply.
On Monday, bank shares in Asia were mixed - steady in
Australia and Tokyo but slipping in Hong Kong , where Standard Chartered shares fell 4%.
S&P 500 futures rose 0.5% and European futures rose 1%.
The collapse of SVB little more than two weeks ago has
reverberated around the world, sending U.S. depositors fleeing
smaller banks for larger cousins while the hit to confidence
forced Credit Suisse into the arms of rival UBS last week.
In March, the Stoxx index of European bank shares is
down more than 18% and the U.S. KBW regional bank index has lost 21%, with investors on edge about what's next.
"It's clearly not over," Australia and New Zealand Banking
Group Chief Executive Shayne Elliott said in an interview posted
to the bank's website, where he said the turmoil has the
potential to escalate into a bigger financial crisis.
"I don't think you can sit here and say, 'Well, that's all
done, Silicon Valley Bank and Credit Suisse and, you know, life
will go back to normal,'" Elliott said. "These things tend to
roll through over a long period of time."
CARROTS, STICKS AND ACRONYMS
The sudden spike in tensions for banks has raised questions
about whether major central banks will continue to pursue
aggressive interest rate hikes to tamp down inflation, and
whether tightened lending will hurt the global economy.
In Europe, bank bonds are under pressure and credit default
swaps, or the cost of insurance against defaults, uneasily high.
Deutsche Bank's five-year CDS hit their highest since late 2018
on Friday, data from S&P Global Market Intelligence showed.
In the U.S., where flows into money market funds have risen
by more than $300 billion in the past month to a record atop
$5.1 trillion, focus is on depositors' confidence in regional
lenders -- which could take some salve from an SVB sale.
The SBV deal comes after several weeks of looking for a
suitor and after the FDIC called for separate offers for SVB
Private and SVB.
Some $90 billion in securities remains with the FDIC for
sale, it said. First Citizens said it wants to build on SVB's
venture capital business and it will accelerate an expansion in
California.
"Effectively you're going to get a combination of carrots,
sticks, and acronyms in order to ensure you get the outcome you
want and that allows (authorities) to still use interest rates
to combat inflation," Rabobank strategist Michael Every said.
"This seems to be part and parcel of that."
(Additional reporting by Maria Ponnezhath in Bengaluru and Tom
Westbrook in Singapore; Writing by Tom Westbrook; Editing by
Jacqueline Wong)
