By Orla McCaffrey
First Citizens BancShares Inc. said Friday it plans to buy CIT Group Inc. in an all-stock deal valued at roughly $2.2 billion.
The combination of First Citizens, based in Raleigh, N.C., and CIT, based in New York City, would create one of the larger regional banks in the U.S. with more than $100 billion in assets. The company will keep the First Citizens name and ticker symbol after the merger and will continue to be run by the First Citizens CEO.
The combination would be one of the bigger bank tie-ups in recent years. Two larger regional banks, BB&T and SunTrust, merged last year to become Truist Financial Corp., the largest bank deal since the financial crisis ushered in stricter regulations.
Regional lenders are struggling to compete with big national banks such as JPMorgan Chase & Co. and Bank of America Corp., which have raked in deposits by attracting customers with flashy apps and ubiquitous branches. Low interest rates have weighed on bank profits, especially those of regional banks that rely more on traditional lending than their larger competitors.
At first blush, the pairing seems odd. CIT operates a national 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 should give the commercial lending operations a boost through First Citizens' low-cost deposits, which can replace more expensive funding.
"It's an excellent strategic combination because you're marrying a really solid deposit franchise to a bank that has always struggled to find a good funding base," said Abbott Cooper, founder of Driver Management, a bank-focused investment-management firm.
First Citizens shares rose 7% in morning trading to $377.65. CIT's shares jumped 20% to $24.05.
CIT shareholders will receive 0.062 share of First Citizens Class A stock for each share of CIT common stock, valuing them at about $21.91 based on Thursday's closing prices. That is an 11% premium over where CIT shares closed Thursday.
First Citizens shareholders will own about 61% of the combined company, and CIT shareholders will own the remaining 39%.
The chairman and chief executive of the combined company will be Frank Holding Jr., who currently holds those roles at First Citizens. Ellen Alemany, the chairwoman and CEO of CIT, will become vice chairwoman.
CIT Group also owns OneWest, a retail bank that was previously run by Steven Mnuchin, now the Treasury secretary. OneWest was created during the financial crisis when a consortium led by Mr. Mnuchin bought out failed 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% profit increase.
The deal is expected to close in the first half of next year.
--Matt Grossman contributed to this article.
Write to Orla McCaffrey at email@example.com
(END) Dow Jones Newswires