First Citizens: Low Returns Offset Buyback Potential

2025-06-01 21:08:00 ET

Summary

• First Citizens Bancshares benefits from strong capital and deposit growth, but weak returns on equity and tight net interest margins limit upside.
• The SVB acquisition accelerated growth and expanded FCNCA's reach, but integration and regulatory costs loom as the bank nears $250 billion in assets.
• Excess capital is weighing on returns; management is expected to increase buybacks to optimize the balance sheet and boost shareholder value.
• With shares only 3% undervalued and limited near-term catalysts, I rate FCNCA a 'hold' and see better opportunities elsewhere in the sector.

First Citizens Bancshares ( FCNCA ) (FCNCB) has been a respectable performer over the past year, gaining about 7%, as the bank has benefitted from its solid capital position and ongoing loan growth. That said, shares are still substantially below their highs, weighed down by fairly weak returns on equity. As a result, we are likely to see a step-up in buyback activity to better optimize the balance sheet, creating the question of whether now is a good time to buy FCNCA....

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