First Citizens Bankshares Inc.
FCNCB 16.66%
Said on Friday that it plans to buy CIT Group Inc.
C.I.T. 27.94%
In all-stock deals worth about 2 2.7 billion.
The combination of New York City-based Raleigh, NC and CIT-based First Citizens Will create more than 100 billion in assets from one of the largest regional banks. After the merger, the company will have the First Citizens name and ticker symbol and will be run by the First Citizens CEO.
The combination will be one of the biggest bank tie-ups in recent years. Two major regional banks, BB&T TFC. -1.18%
And Suntrust, merged last year with Truist Financial Corp. Happened to be the biggest bank deal since the beginning of stricter rules in the wake of the financial crisis.
Regional lender JPMorgan Chase & Co. And Bank of America is struggling to compete with large national banks such as America Corp., which has increased deposits by attracting customers with shiny apps and ubiquitous branches. Low interest rates weigh on bank profits, especially those of regional banks that rely more on traditional lending than their larger competitors.
At first blush, the pair looks fantastic. CIT manages the national commercial financing and equipment leasing business. The first citizens run by the same North Carolina family for three pay generations run more than 500 branches in 19 states.
Mergers should first accelerate commercial lending operations through low-cost deposits of citizens, which could replace more expensive funds.
“It’s an excellent strategic combination because you’re always marrying a really solid deposit franchise in a bank struggling to find a good funding base,” said Abbott Cooper, founder of Driver Management, a bank-centric investment-management company.
Shares of First Citizens rose 7% in morning trading to 7,377.65. Shares of CIT rose 20% to 24.05.
CIT shareholders will receive 0.062 shares of First Citizen Class E for each share of CIT Ordinary Shares, valued at approximately .9 21.91 based on Thursday’s closing price. That’s an 11% premium where shares of CIT closed on Thursday.
The shareholders of First Citizens own about 61% of the joint venture, and the shareholders of CIT own the remaining 39%.
The chairman and chief executive of the joint venture will be Frank Holding Jr., who is currently handling those roles in First Citizens. Ellen Alema, Chairman and CEO of CIT, will be the Vice President.
The CIT Group also owns OneWest, a retail bank previously run by Treasury Secretary Steven Munchin. OneWest was created during the economic crisis when a consortium led by Mr Munuchin bought the failed NDM Indimec. Although the group revived the bank’s fortunes, it was criticized for predicting a number of borrowers.
On Friday, CIT reported a 40% decline in third-quarter profits from a year earlier. The first citizens increased profits by 14%.
The deal is expected to close in the first half of next year.
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– Contributed by Matt Grossman to this article.
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