First Citizens BancShares Inc.
he said Friday he plans to buy
CIT Group Inc.
in a stock deal worth approximately $ 2.2 billion.
The combination of First Citizens, headquartered in Raleigh, N.C., and CIT, headquartered in New York City, would create one of the largest regional banks in the United States with over $ 1
The combination would represent one of the biggest banking constraints in recent years. Two large regional banks,
and SunTrust, merged last year to become Truist Financial Corp., the largest banking deal since the financial crisis introduced stricter rules.
Regional lenders are struggling to compete with large national banks like JPMorgan Chase & Co. and Bank of America Corp., which have raised deposits by attracting customers with flashy apps and ubiquitous branches. Low interest rates weighed on banks’ profits, particularly those of regional banks which rely more on traditional lending than their largest competitors.
At first glance, the pairing seems strange. CIT operates a nationwide commercial lending and equipment leasing business. First Citizens, run by the same North Carolina family for three generations, operates more than 500 branches in 19 states.
The merger is expected to boost commercial lending operations through First Citizens’ low-cost deposits, which can replace more expensive financing.
“It’s an excellent strategic combination because you’re marrying a really strong deposit franchise with a bank that has always struggled to find a good funding base,” said Abbott Cooper, founder of Driver Management, an investment management firm focused on bank.
First Citizens shares were up 7% in morning trading to $ 377.65. CIT shares were up 20% to $ 24.05.
CIT shareholders will receive 0.062 First Citizens Class A shares for each share of CIT common stock, valuing them at approximately $ 21.91 based on Thursday’s closing price. This is an 11% premium compared to where CIT shares closed on Thursday.
First Citizens shareholders will own approximately 61% of the combined company and CIT shareholders will own the remaining 39%.
The chairman and chief executive officer of the combined company will be Frank Holding Jr., who currently holds these roles at First Citizens. Ellen Alemany, president and CEO of CIT, will become vice president.
CIT Group also owns OneWest, a retail bank formerly managed by Steven Mnuchin, now secretary of the Treasury. OneWest was created during the financial crisis when a consortium led by Mr. Mnuchin bought the bankrupt lender IndyMac. Although the group revived the bank’s fortunes, it was criticized for foreclosing on many borrowers.
CIT on Friday reported a 40% drop in third-quarter profit from a year ago. First Citizens reported a 14% increase in profits.
The operation is expected to close in the first half of next year.
—Matt Grossman contributed to this article.
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