Valens Equity Weekly Insights - 2025 09 30
First Citizens Bancshares has transformed its banking portfolio to capitalize on a bullish market through two acquisitions in recent years. Uniform Accounting shows that investors are not pricing in the opportunity for its returns to improve significantly as the company continues to benefit from market tailwinds and lower interest rates.First Citizens has transformed its loan portfolio since 2020 as the company moves away from risky markets and into areas that are seeing strong growth. As market tailwinds push tech and industrial companies to fund business expansion through debt, First Citizens will be positioned to capitalize. And declining interest rates will make it easier for companies to obtain debt, leading to more business opportunities for First Citizens. As it continues to grow, the company can accelerate Uniform ROE far higher than the market expects.
First Citizens' management's significant ownership of the company suggests they are closely aligned to optimize shareholder return, driving upside for investors.
Management confidence in its second quarter earnings call the strength of potential future clients suggests equity upside is warranted.
FCNC.A
First Citizens BancShares is a holding company. Through its banking subsidiary, First-Citizens Bank & Trust Co. (FCB), the company provides a range of retail and commercial banking services. Loan services include various types of commercial, business and consumer lending. Deposit services include checking, savings, money market and time deposit accounts. The company's subsidiaries also provides mortgage lending, a trust department, wealth management services for businesses and individuals and other activities incidental to commercial banking. FCB's subsidiaries provide various investment products including annuities, discount brokerage services and third-party mutual funds.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
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