First Citizens prefers buybacks over M&A, for now
First Citizens BancShares is sticking with its share-repurchase strategy, with executives saying Thursday that buybacks are the best way to return capital to shareholders in the current environment, which has been marked by tariffs-driven market volatility and economic uncertainty.
That doesn't mean mergers and acquisitions, which have been a key factor in First Citizens' recent expansion, are off the table, according to Craig Nix, First Citizens' chief financial officer.
"I would not say that our appetite for M&A has changed," Nix said during the bank's first-quarter earnings call. "We're really dealing with what's in front of us right now, and that's the share repurchase plan. That's the most effectual way for us to return capital at this point in time."
Still, "M&A remains an important part of our growth strategy over the long term," he said.
The Raleigh, North Carolina-based parent of First Citizens Bank is two years out from buying a significant portion of Silicon Valley Bank, whose abrupt failure in mid-March 2023 destabilized the industry and forced banks of all sizes to secure their deposits and calm jittery customers.
The deal nearly doubled First Citizens' total assets, and it came just over a year after the company had already doubled in size with its acquisition of CIT Group in New York City.
As a result, First Citizens' capital ticked upward. Its common equity Tier 1 ratio, which compares a bank's capital against its assets, hovered at a little over 13% in 2024. In the first quarter of this year, the CET1 ratio came in slightly lower at 12.8%, the company said in a press release Thursday.
The goal is to reduce the ratio to 10.5% to 11% by the end of next year's first quarter, Nix said.
During the period ending March 31, 2025, First Citizens repurchased $613 million of common shares, bringing total share repurchases since August to $2.4 billion. In total, the $228.8 billion-asset company is aiming to buy back $3.6 billion of shares through its current repurchase program.
To get to the 10.5% to 11% CET1 target, the company is thinking about implementing another buyback program in the second half of this year and will share more information in July, Nix said.
As of midday Thursday, the company's stock was up about 1%. Like much of the rest of the banking industry, its share price has declined this year. It's currently down about 15.4% since Jan. 1, compared with a 14.8% drop in the KBW Nasdaq Bank Index.
During First Citizens' earnings call on Thursday, Keefe, Bruyette & Woods analyst Chris McGratty wanted to know if the bank currently sees an opportunity to step up the pace of buybacks in order to reach its CET1 target.
Nix said the company's current stock price "is making our repurchases more effectual, and we're able to repurchase more shares than otherwise," but noted that buybacks are dictated by First Citizens' capital plan and said the company is "very hesitant to deviate from" that plan.
In the first quarter, First Citizens' net income totaled $483 million, down 34% from the year-ago period in part because of a decline in net interest income. Results also included acquisition-related expenses of $42 million, plus costs related to taxes and write-downs of intangible assets.
Earnings per share of $34.47 missed expectations. Analysts surveyed by S&P Capital IQ had expected the company to report $37.43 per share. On an adjusted basis, EPS for the quarter was $37.79.
Meanwhile, net interest income of $1.7 billion was down 8.5% year over year, and fee income of $635 million was up 1.3%. Expenses, which totaled $1.5 billion, rose 8.5% as provisions for credit losses more than doubled to $154 million, up from $64 million in the year-ago quarter.
First Citizens largely maintained its outlook for the rest of the year. It slightly reduced its net interest income expectations for 2025 to $6.55 billion-$6.95 billion, down from $6.6 billion-$7 billion it projected in January, and it increased its forecast for deposits to $163 billion-$168 billion, up from $162 billion-$167 billion.
The loan growth forecast remained unchanged at $144 billion-$147 billion.
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