Raphael Stevens

The total deal value for the region plunged by 44% from $354 billion in 2021 to $198 billion in 2022, Bain & Co said in a Tuesday report.
China and India accounted for a drop of $35 billion in total deal value for large growth deals for the year, it said.

Asia-Pacific’s private equity market plummeted last year — as investors’ appetite for risk fell in the face of inflation and geopolitical tensions, according to Bain & Company.
The total deal value for the region plunged by 44% to $198 billion in 2022, the global management and consulting firm said in a Tuesday report. That’s compared to $354 billion in 2021, the analysts said adding that nearly 70% of surveyed fund managers expect the negative trend to continue into 2024.

Lingering macroeconomic uncertainties alongside rising costs and worsening company performance that dampened investor sentiment, Bain said in its Asia Pacific Private Equity Report 2023.

Central Hong Kong and the IFC tower seen from the Avenue of Stars in Tsim Sha Tsui. (Photo by Marc Fernandes/NurPhoto via Getty Images)
Nurphoto | Nurphoto | Getty Images

“Investors, sensing a new era of slower growth, mounting inflation, and greater uncertainty, took time out to recalibrate their strategies, recognizing that what worked well in the past may not be the right approach for 2023 and beyond,” a group of authors from Bain’s Private Equity practice including Kiki Yang said in the report.
“If the conditions—macroeconomic uncertainty, poor company performance, and a decline in deal activity—that prevailed in 2022 persist, valuations may continue to contract as fund managers adopt a wait-and-see attitude,” Bain wrote.

The traditional strongholds for Internet and tech deals—Greater China, India, and Southeast Asia—all experienced sharp declines.

Asia Pacific Private Equity Report 2023
Bain and Co.

Deal value in Greater China fell by 53% as investors grappled with the nation’s zero-Covid policy, it said, leading declines in the wider region. China and India accounted for a drop of $35 billion in total deal value for large growth deals for the year, Bain said.

Tech, internet deal values fell

While internet and technology remained as Asia-Pacific’s largest investment sector, it also saw a decline from the previous year, which marked the lowest level seen since 2017, the firm said.

“For more than a decade, the Internet and tech sector has attracted the largest share of private equity capital in the Asia-Pacific region. However, its share of deal value dipped in 2022 to 33% from 41% the previous year,” Bain authors wrote in the report.

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“The traditional strongholds for Internet and tech deals—Greater China, India, and Southeast Asia—all experienced sharp declines,” Bain said, adding that deal value in the sector for greater China markets fell 62% year-on-year.
Within the technology sector, cloud services held the largest deal value, with consumer technology businesses such as e-commerce and online services seeing deal value drop by roughly 70% compared to a year ago.

ESG-related investments

While macroeconomic conditions dampened investors’ sentiment in private equity deals region-wide, Bain saw a rise in the number of deals related to environmental, social, and corporate governance (ESG).
“In the energy and natural resources sector, investments in utilities and renewables made up 60% of deal value, reflecting the rise of environmental, social, and corporate governance considerations as an investment priority,” Bain said.

The number of deals for utilities and renewables rose 47% compared to a year ago, the report said, noting Australia’s Macquarie Group’s offshore wind business Corio Generation secured an investment of roughly $1 billion from investor Ontario Teachers’ Pension Plan.
General partners surveyed by Bain say they will continue to hone in on ESG-related investment in the following years, it said.
“Half of the GPs we surveyed plan to significantly increase their effort and focus on ESG in the next three to five years, up from 30% three [years] ago,” Bain said.

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First Citizens BancShares is acquiring $72 billion in Silicon Valley Bank assets at a discount of $16.5 billion, or 23%, according to a Sunday release from the Federal Deposit Insurance Corp.
But even after the deal closes, the FDIC remains on the hook to dispose of the majority of SVB’s assets, about $90 billion, which are being kept in receivership.
“The deal was getting stale,” said former Federal Reserve examiner Mark Williams. “I think the FDIC realized that the longer this took, the more they’d have to discount it to entice someone.”

The winning bidder in the government’s auction of Silicon Valley Bank’s main assets received several concessions to make the deal happen.
First Citizens BancShares is acquiring $72 billion in SVB assets at a discount of $16.5 billion, or 23%, according to a Sunday release from the Federal Deposit Insurance Corporation.

The deal doubles First Citizens’ asset size, catapulting it to $219 billion in total assets, according to the bank’s presentation. It is gaining all the loans and deposits of SVB, as well as 17 branches, the FDIC said.
But even after the deal closes, the FDIC remains on the hook to dispose of about $90 billion in SVB assets being kept in receivership. The sale excludes investment securities, meaning the FDIC is stuck with SVB’s bonds that have dropped in value, and which helped spark the firm’s demise.
And the FDIC agreed to a five-year loss-sharing deal on commercial loans First Citizens is taking over, as well as a $70 billion credit line in case customers pull more deposits, the North Carolina-based bank said Monday.
The FDIC is also giving First Citizens a five-year, $35 billion loan at a favorable 3.5% interest rate to help finance the deal, First Citizens said Monday during an investor call. In exchange, the FDIC is getting equity rights in the bank that could be worth up to $500 million.
All told, the SVB failure will cost the FDIC’s Deposit Insurance Fund about $20 billion, the agency said. That makes the SVB failure the costliest in history of the deposit insurance fund, which began operating in 1934. The cost will be borne by higher fees on American banks that enjoy FDIC protection.

Shares of First Citizens shot up 55% in trading Monday.

Underwhelming interest

The deal terms may be explained by tepid interest in SVB assets, according to Mark Williams, a former Federal Reserve examiner who lectures on finance at Boston University.
The government seized SVB on March 10 and later extended the deadline for its assets. Bidding had come down to First Citizens and Valley National Bancorp, Bloomberg reported last week.
“The deal was getting stale,” Williams said. “I think the FDIC realized that the longer this took, the more they’d have to discount it to entice someone.”
The ongoing sales process for another ailing lender may also have cooled interest in SVB assets, according to a person with knowledge of the process. Potential acquirers held off on the SVB auction because they hoped to make a bid on First Republic Bank, which they coveted more, this person said.
In the wake of SVB’s collapse this month, depositors concerned about their uninsured holdings pulled billions of dollars in cash from smaller banks and put them into financial giants including JPMorgan Chase. That sparked a sell-off of regional bank shares, and First Republic was among the hardest hit.

The big leagues

To offset the outflows, JPMorgan and 10 other banks deposited $30 billion in First Republic, but its stock continued to slide, prompting the bank to consider strategic alternatives. On Monday, First Republic shares were rallying along with other bank stocks.
In its release, First Citizens said it has closed more FDIC-brokered bank acquisitions than any other lender since 2009. The bank went from having $109 billion in assets at yearend to more than $200 billion after this transaction, as well as more than 550 branches across 23 states.
“Let me say that this acquisition is compelling financially, strategically and operationally,” First Citizens CEO Frank Holding told analysts Monday.
Despite the security of its $70 billion FDIC credit line, bank managers acknowledged the risk of deposit flight as the merger is executed. But the bank’s CFO also said he believed some SVB clients will return and bring their cash holdings because of the stability they bring.
The deal continues the bank’s track record of acquiring distressed banks at a discount, according to Williams.
“They move into the big leagues with this deal,” he said. “When other banks see fire, they run away. This bank runs towards it.”
Read more: Deposit drain from smaller banks into financial giants like JPMorgan Chase has slowed, sources say

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Jakub Porzycki | Nurphoto | Getty Images

Check out the companies making the biggest moves midday:
Coinbase Global — Shares of the cryptocurrency exchange tumbled 7.8% in midday trading, along with Bitcoin and ether, after the Commodity Futures and Trading Commission filed a complaint against crypto exchange operator Binance. The CFTC alleges the exchange actively solicited U.S. users and subverted the exchanges own “ineffective compliance program.” The suit called both bitcoin and ether “commodities.”

First Citizens BancShares — The Raleigh, NC-based bank soared 53.74% after agreeing to buy Silicon Valley Bank’s deposits and loans. The deal includes about $72 billion of SVB assets at a discount of $16.5 billion.
First Republic, PacWest — Regional bank stocks moved higher on Monday after reports that the government was considering further support and that deposit outflows had slowed. Shares of First Republic jumped by 11.81%, while PacWest Bancorp rose about 3.46% and Western Alliance gained 3.03%
Roku — Shares of the media platform jumped more than 4.7% after Susquehanna upgraded it to positive from neutral. The Wall Street firm said it continues to see Roku as “a prime beneficiary of the secular shift of linear budgets.”
Frontier Communications — Shares of the telecommunications company slid 8.91% after Morgan Stanley downgraded the stock to underweight. The firm noted that Frontier is changing hands at a significant premium compared to peers, including AT&T and Verizon. The stock had been faring better than the broader field of hardwire telecoms firms, but Monday’s slide pushed the stock down roughly 16% from the start of the year.
Carnival — The cruise operator shed 4.77% despite beating earnings expectations for its first quarter. However, it guided for an EPS loss of 34 to 42 cents in the second quarter, more than StreetAccount’s estimate of 28 cents.

Ollie’s Bargain Outlet Holdings — The stock was down 2.8% during midday trading after Citi downgraded the retailer to sell from neutral, saying it has a “difficult model to scale” and has seen weaker productivity at its new stores in the past several years. The stock closed only 0.14% down.
International Flavors & Fragrances — The stock advanced 6.35%. The New York-based maker of flavors, fragrances, and cosmetic ingredients reaffirmed first-quarter adjusted EBITDA guidance on Monday of $470 million to $490 million, slightly below StreetAccount’s estimate of $492 million. It reaffirmed revenue of $2.95 billion to $3 billion, compared to $3 billion expected by analysts, per StreetAccount. IFF also reaffirmed its commitment to its net debt to credit adjusted EBITDA target of less than 3x by the end of 2024.
Pinterest — The social media platform gained 2.18% after UBS upgraded it to buy from neutral. The firm said PINS has the potential to improve advertising under new leadership.
Corning — The glass and fiber optic cable maker advanced 1.52% after getting an upgrade at Deutsche Bank to buy from hold. Analyst Matthew Niknam said Corning is “turning a corner” on revenues and earnings per share.
Marqeta — The payments stock jumped 8.96% after Wolfe Research upgraded it to outperform from peer perform. The Wall Street firm said the risk and reward for the stock is “too compelling,” and that investors are underappreciating the business.
—CNBC’s Alex Harring, Pia Singh, Yun Li, Sarah Min, Jesse Pound and Brian Evans contributed reporting.

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Fed Governor Michael Barr, the central bank’s vice chair for supervision, released prepared remarks that he will deliver to two congressional panels regarding the failure of Silicon Valley Bank.
“To begin, SVB’s failure is a textbook case of mismanagement,” he said.
Beyond that, Barr said he views the health of the banking system in general as “sound and resilient, with strong capital and liquidity.”

The Federal Reserve’s top banking regulator said Monday that the failure of Silicon Valley Bank was due largely to mismanagement, though he noted that regulation and oversight also need to step up.
Fed Governor Michael Barr, the central bank’s vice chair for supervision, insisted in prepared remarks to two congressional panels that regulators had noted issues with SVB’s risk management, but the bank was too slow to respond.

“To begin, SVB’s failure is a textbook case of mismanagement,” he said. “The bank waited too long to address its problems, and ironically, the overdue actions it finally took to strengthen its balance sheet sparked the uninsured depositor run that led to the bank’s failure.”
Barr is to address the Senate Banking Committee on Tuesday, followed by an appearance before the House Financial Services Committee on Wednesday.
The Fed is conducting a review of the SVB collapse with findings set to be released May 1.
“I am committed to ensuring that the Federal Reserve fully accounts for any supervisory or regulatory failings, and that we fully address what went wrong,” Barr said.
FDIC Chair Martin Gruenberg also released his remarks Monday. He, too, noted the importance of a close look at how both SVB and Signature Bank failed and the implications for regulations and oversight.

“The two bank failures also demonstrate the implications that banks with assets over $100 billion can have for financial stability,” Gruenberg said. “The prudential regulation of these institutions merits serious attention, particularly for capital, liquidity, and interest rate risk.”
He further noted that the financial system faces “significant downside risks from the effects of inflation, rising market interest rates, and continuing geopolitical uncertainties.” He cautioned that more Fed rate hikes could increase the kinds of unrealized losses that catalyzed the recent banking stress.

A look at regulatory standards

Along with the examination into what happened specifically with SVB, Barr also noted that the probe will examine whether the Fed’s testing of risk was adequate.
He pointed out that the supervisors identified problems with SVB’s liquidity risk management as far back as late-2021. The following year, regulators continued to point out issues and lowered the bank’s management rating to “fair.”
Along with that, Fed officials received a presentation in mid-February on the risk that rising interest rates, implemented by the central banks, were having on bank operations. Still, Barr said the review will exam whether standards should have been tighter.
“Specifically, we are evaluating whether application of more stringent standards would have prompted the bank to better manage the risks that led to its failure,” he said. “We are also assessing whether SVB would have had higher levels of capital and liquidity under those standards, and whether such higher levels of capital and liquidity would have forestalled the bank’s failure or provided further resilience to the bank.”
SVB failed after a run on deposits revealed a duration mismatch in the bank’s bond portfolio. Specifically, the bank was holding long-dated securities that fell in value as yields increased. When it had to sell some of those asset at a loss to cover deposit withdrawal demands, it triggered a further run and ultimate failure.
Barr said the Fed will be looking into changing rules for long-term debt at institutions that aren’t deemed systemically dangerous. Part of the review also will look at whether more stringent standards would have pushed SVB to have a better handle on its liquidity risk.
Beyond that, Barr said he views the health of the banking system in general as “sound and resilient, with strong capital and liquidity.”

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The deal will see First Citizens Bank purchase around $72 billion of Silicon Valley Bank assets at a discount of $16.5 billion.
A further $90 billion in securities and other assets will remain “in receivership for disposition by the FDIC.”
The U.S. Federal Deposit Insurance Corporation transferred all SVB deposits and assets into a new “bridge bank” earlier this month in an effort to protect depositors of the failed lender.

Photo illustration, the Silicon Valley Bank logo is visible on a smartphone, with the stock market index in the background on the personal computer on March 14, 2023, in Rome, Italy.
Andrea Ronchini | Nurphoto | Getty Images

First Citizens BancShares will buy Silicon Valley Bank’s deposits and loans, the U.S. Federal Deposit Insurance Corporation said Monday, just over two weeks after the biggest U.S. banking collapse since the global financial crisis.
First Citizens shares jumped more than 50% during morning trade on Wall Street.

The deal includes the purchase of approximately $72 billion of SVB assets at a discount of $16.5 billion, but around $90 billion in securities and other assets will remain “in receivership for disposition by the FDIC.”
“In addition, the FDIC received equity appreciation rights in First Citizens BancShares, Inc., Raleigh, North Carolina, common stock with a potential value of up to $500 million,” the FDIC said in a release. First-Citizens Bank & Trust Company is a subsidiary of First Citizens BancShares.
The deal comes after the regulator transferred all SVB deposits and assets into a new “bridge bank” earlier this month in an effort to protect depositors of the failed lender.
“The 17 former branches of Silicon Valley Bridge Bank, National Association, will open as First–Citizens Bank & Trust Company on Monday, March 27, 2023,” the FDIC statement said Monday. First-Citizens Bank & Trust Company is a subsidiary of First Citizens BancShares.

“Customers of Silicon Valley Bridge Bank, National Association, should continue to use their current branch until they receive notice from First–Citizens Bank & Trust Company that systems conversions have been completed to allow full–service banking at all of its other branch locations.”

First Citizens and the FDIC also entered into a “loss-share transaction” — in which the FDIC absorbs part of the loss on a particular pool of assets — on the commercial loans purchased from the SVB bridge bank.
“The loss–share transaction is projected to maximize recoveries on the assets by keeping them in the private sector. The transaction is also expected to minimize disruptions for loan customers,” the FDIC explained.
The regulator added that the estimated cost of SVB’s failure to its Deposit Insurance Fund (DIF) will be around $20 billion, with the exact cost determined once the receivership is terminated.
Regulators closed down SVB, a big name in the tech and venture capital sector, and took control of its deposits on March 10 in what was the largest U.S. bank failure since the global financial crisis.

The collapse came after the bank’s clientele withdrew billions from their accounts and the value of assets previously viewed as safe — such as U.S. Treasury bills and government-backed mortgage securities — dropped dramatically in the face of the Federal Reserve’s aggressive interest rate hikes.
This left the bank floundering as it attempted to raise $2.25 billion to meet clients’ withdrawal needs and fund new lending.
As of March 10, the SVB bridge bank had around $167 billion in total assets and approximately $119 billion in total deposits, the FDIC confirmed.
SVB’s collapse sent shockwaves through global banks and was cited as one of the catalysts for Swiss giant Credit Suisse’s eventual downfall and emergency rescue by domestic rival UBS.
However, many analysts believe the ensuing market volatility has been unwarranted given the “idiosyncratic” flaws that left the likes of SVB and Credit Suisse exposed and caused a loss of investor confidence.
— CNBC’s Jihye Lee contributed to this report
Correction: This article has been updated to reflect that SVB’s failure was the biggest U.S. banking collapse since the global financial crisis.
Clarification: Story updated to reflect that First-Citizens Bank & Trust Company is a subsidiary of First Citizens BancShares

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