FIRST CITIZENS BANCSHARES INC /DE/ Q4 FY2024 earnings call

Management Statement and Operational Highlights:

• Frank Holding noted strong fourth quarter results with adjusted earnings per share of $45.10, driven by higher core PPNR. SVB had a good quarter with modest improvements in VC investment activity. Loan and deposit growth was seen across segments. Capital and liquidity remained strong, with 3.5% of Class A common stock repurchased in the fourth quarter. Strategic priorities for 2025 include expanding customer capabilities, developing associates, enhancing operational efficiency, optimizing balance sheet management, and maintaining prudent risk management.
• Craig Nix discussed return metrics, with ROE and ROA adjusted for notable items at 11.51% and 1.14% respectively. Net interest income was affected by rate cuts, but adjusted noninterest income increased 9% sequentially. Credit quality showed nonaccrual loans decreasing, though net charge-offs were slightly up. Balance sheet had broad-based loan growth, and capital position was discussed with CET1 capital ratio details.

Segment Performance:

• Loans: Broad-based loan growth across operating segments, ending the quarter up $1.5 billion or 1.1% sequentially. General Bank loans grew by $676 million, Commercial Bank loans by $508 million, and SVB Commercial loans by $342 million.
• Deposits: Total client funds registered solid growth. SVB had sequential actual average growth of $692 million and $1.2 billion. Total client funds increased by $5.3 billion from the third quarter.

Guidance:

• Loans: First quarter expected to be in the $140 billion to $142 billion range, full year $144 billion to $147 billion.
• Deposits: First quarter projected $154 billion to $157 billion, full year $162 billion to $167 billion.
• Net Interest Income: First quarter relatively stable, full year in the range of $6.6 billion to $7 billion.
• Credit Losses: First quarter net charge-off ratio expected in 40 to 50 basis points range, full year 35 to 45 basis points.
• Adjusted Non-Interest Income: First quarter $475 million to $500 million, full year $1.95 billion to $2.05 billion.
• Adjusted Non-Interest Expense: First quarter flat to modestly up, full year $5.05 billion to $5.2 billion.
• Tax Rate: Lowered to 25% to 26% for 2025.

Risks:

• Economic slowdown could negatively impact loan and deposit growth.
• Credit risks in certain portfolios such as commercial finance, general office, and investor-dependent segments.
• Uncertainty in VC investment and fundraising environment affecting client fund growth.
• Regulatory changes could impact expense priorities related to category three readiness.

Q: Bernard von-Gizycki asked about the 2025 outlook for net interest income range assumptions.

A: Craig Nix explained the range contemplates 0 to 4 rate cuts, anchored to two rate cuts, with net interest income and margin dependent on rate cut magnitude and timing.

Q: Bernard von-Gizycki inquired about SVB acquisition related synergies in the 2025 guide.

A: Craig Nix stated there are no material or significant expense synergies from further SVB acquisitions in the guidance.

Q: Anthony Elian asked about total client fund growth in SVB during the fourth quarter.

A: Marc Cadieux said large deals contributed to the total client fund growth, but noted caution on persistence with a higher for longer rate outlook.

Q: Anthony Elian asked about M&A outlook.

A: Frank Holding responded there is no material M&A projected in 2025, though the company is opportunistic.

Q: Chris McGratty asked about category three readiness and expenses.

A: Craig Nix said expenses associated with category three readiness are reflected in the run rate of expenses.

Q: Christopher Marinac asked about the loss share agreement and buyback.

A: Craig Nix said the loss share agreement's impact on capital ratios is shrinking, and the company contemplates instituting another share repurchase plan in the second half of 2025.

Q: Nicholas Holowko asked about regulatory backdrop and expense investments.

A: Craig Nix said the company remains steadfast on meeting regulatory expectations for category three readiness with no significant near-term regulatory changes altering investment priorities.