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(Reuters) -Shares of several mid-tier U.S. lenders rose sharply in premarket trading on Monday after a buyer emerged for large chunks of embattled Silicon Valley Bank’s deposits and loans, which helped inject some calm into fragile markets.
SVB was the largest bank since the 2008 financial crisis to collapse when California regulators closed it on March 10, sparking a major turmoil in the global banking sector.
Market worries eased on Monday as First Citizens BancShares agreed to buy failed SVB in a deal in which unit First–Citizens Bank & Trust Company will assume SVB assets of $110 billion, deposits of $56 billion and loans of $72 billion.
The Federal Deposit Insurance Corporation, which took control of SVB earlier this month, said as part of the deal it has received equity appreciation rights in First Citizens BancShares stock with a potential value of up to $500 million.
First Citizens shares surged 40%, lifting other U.S. lenders as well.
“There is relief that First Citizen Bank, one of America’s largest family-controlled banks, has come to the rescue,” said Susannah Streeter, head of money and markets at Hargreaves Lansdown.
“A calm of sorts has descended on the banking sector but hopes that this move will see significant stability return may be short-lived.”
Investors are keeping a close eye on First Republic Bank (NYSE:FRC) as the beleaguered lender attempts to strike potential deals after losing 90% of its market value so far this month.
Its shares jumped 27% after a report said U.S. authorities were considering more support for banks, which could give the embattled regional lender more time to shore up its balance sheet.
Shares in Keycorp rose 7.1% and Western Alliance (NYSE:WAL) 5.9% and Pacific West Bancorp 9.4%. Major U.S. banks JPMorgan Chase & Co (NYSE:JPM), Citigroup (NYSE:C) and Bank of America (NYSE:BAC) also advanced between 1.5% and 2.1%.
Stuart Cole, head macro economist at Equiti Capital, said report of more potential support by the U.S. government is good news. “If such a facility had already been in place, perhaps SVB would not have gone under,” he said.
European banking shares also rose 1.4% as the SVB deal eased some anxiety in the sector following a 3.8% tumble on Friday on worries around Deutsche Bank (ETR:DBKGn).
