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First-Citizens Bank & Trust Company -- Moody's upgrades CIT Group's ratings (long-term senior unsecured to Baa2 from Ba1) and downgrades First Citizens BancShares' ratings (subordinated debt to Baa2 from Baa1), concluding review following merger close; outlook stable

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Rating Action: Moody's upgrades CIT Group's ratings (long-term senior unsecured to Baa2 from Ba1) and downgrades First Citizens BancShares' ratings (subordinated debt to Baa2 from Baa1), concluding review following merger close; outlook stableGlobal Credit Research - 04 Jan 2022New York, January 04, 2022 -- Moody's Investors Service ("Moody's") has upgraded all long-term ratings of CIT Group Inc. (CIT, long-term senior unsecured debt to Baa2 from Ba1), as well as all long-term ratings and assessments of its lead bank, CIT Bank, N.A., including the bank's Baseline Credit Assessment (BCA, to baa1 from baa3). CIT Bank's short-term deposit rating was upgraded to Prime-1 from Prime-2 and its short-term Counterparty Risk Rating was upgraded to Prime-2 from Prime-3, while its Prime-2(cr) Counterparty Risk Assessment was confirmed.In the same action, Moody's downgraded all long-term ratings of First Citizens BancShares, Inc. (First Citizens, subordinated debt to Baa2 from Baa1), as well as all long-term ratings and the BCA (to baa1 from a3) of its lead bank, First-Citizens Bank & Trust Company (long-term deposits to A2 from A1). First-Citizens Bank & Trust Company's short-term Counterparty Risk Assessment was downgraded to Prime-2(cr) from Prime-1(cr), while its Prime-1 short-term deposit rating was confirmed and its Prime-2 short-term Counterparty Risk Rating was affirmed.Today's action was prompted by the close of the merger of the two firms [1] and concludes the rating reviews that commenced on 16 October 2020.In completing the merger, both CIT and CIT Bank were merged into First-Citizens Bank & Trust Company, with outstanding debt obligations of both CIT and CIT Bank becoming obligations of First-Citizens Bank & Trust Company. However, non-cumulative preferred stock issued by CIT, which was upgraded to Ba1 (hyb) from Ba3 (hyb), has been converted into non-cumulative preferred stock of First Citizens BancShares, Inc. As a result of the merger, both CIT Group, Inc. and CIT Bank, N.A. no longer exist. Accordingly, Moody's will withdraw all outstanding CIT Group Inc. and CIT Bank, N.A. ratings, except for ratings on debt or preferred stock that remains outstanding. The outlook on First-Citizens Bank & Trust Company and First Citizens BancShares is stable."The all-stock merger of First Citizens and CIT, two firms of roughly similar asset size, has resulted in a $111 billion-in-assets US bank that combines CIT's national specialized lending franchises with First Citizens' strong deposit funding base, centered on the Carolinas and other attractive southeastern US markets," said Moody's Senior Vice President Allen Tischler.A complete list of affected ratings and assessments for entities within both banking groups can be found at the end of this press release.RATINGS RATIONALEFollowing the close of the merger, which was originally announced on 16 October 2020, Moody's expects First Citizens will continue to operate with a solid balance sheet, including healthy capitalization and liquidity. Indeed, as measured by its Common Equity Tier 1 capital ratio, First Citizens' regulatory capitalization strengthened about 90 basis points while the merger was pending. In addition, First Citizens' average deposits increased 17% from Q3 2020 to Q3 2021 while its loan growth was flat, which enhanced its already robust liquidity position. Although Moody's estimates that First Citizens' regulatory capitalization will weaken modestly as a result of the merger and that its deposit costs will increase owing to CIT's much smaller base of noninterest-bearing deposits, these underlying improvements in capital and deposit levels since the announcement of the merger are beneficial to the bank's standalone credit profile.Nonetheless, the downgrade of First Citizens' ratings reflects the risks to creditors from the challenges associated with the merger integration, which is First Citizens' largest transaction, by far. Although First Citizens' integration track record is strong, Moody's believes it will take time to fully achieve the merger's anticipated synergies and demonstrate that management avoided any significant due diligence or post-acquisition missteps. As such, Moody's believes that until CIT has been completely integrated into First Citizens, a process likely to take at least a couple of years, First Citizens' risk profile will be heightened. Given the magnitude of the task, Moody's ratings and stable outlook of First Citizens presume that the bank will not undertake another material acquisition until the CIT integration is complete.CIT's asset mix can result in elevated credit costs relative to US regional bank peers, as was the case in 2020 when its net charge-off rate spiked. As such, First Citizens' ratings incorporate Moody's expectation that the bank's future credit metrics could be more susceptible to an economic downturn than they have been on a standalone basis.In approving the transaction, the Federal Reserve noted that First Citizens 'would implement a combination of its and CIT's risk-management policies, procedures, and controls at the combined organization'. Moody's considers combining those policies, procedures and controls to be particularly important for First Citizens' creditors because although its risk management capabilities have proven effective, the acquisition exposes First Citizens to specialized national lending businesses that were not among its own product offerings, including rail, maritime, energy and factoring. Favorably, CIT's chief credit officer and key business leaders are remaining with First Citizens after the merger and the unexpectedly long regulatory approval process allowed First Citizens to fully develop its integration plan. Still, the integration of CIT will be far more complex than any of First Citizens' previous transactions, which were smaller in size and more in line with its historical business mix.First Citizens' profitability, which has been constrained by its weaker operating efficiency profile compared with many of its US regional bank peers, is likely to improve once merger-related costs recede. Following the merger close, First Citizens' deposit base will increase about 80%, but its branch network will grow less than 20%, a reflection of CIT's sizable national online deposit-gathering business. In addition, on a combined basis, a higher proportion of First Citizens' deposits will be deployed into loans, a comparatively higher-yielding asset. Specifically, at 30 September 2021, First Citizens' loan-to deposit ratio was 64% compared with 83% for CIT. First Citizens' management previously noted that its ideal balance sheet mix includes a cash component equal to roughly 4% of interest-earning assets, but that its position at 30 September 2021 on a standalone basis was 19% because deposit growth had significantly outstripped loan growth in previous quarters.From the perspective of CIT's creditors, the ratings upgrade reflects the improvement in the bank's credit profile, which has been strengthened as a result of the firm's merger with First Citizens, a bank that has benefitted from a superior funding base, a stronger risk management track record and more stable earnings than CIT's.The stable outlook on First Citizens' ratings reflects Moody's expectation of little change in the bank's credit profile over the next 12-18 months, as it proceeds with the merger integration, and that it will not undertake another material acquisition until it has fully-integrated CITFACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGSFirst Citizens' ratings could be upgraded if the bank successfully completes the integration and conversion process, achieves improved operating efficiency levels, maintains healthy capital and liquidity, and demonstrates continued good credit risk management, including over its newly acquired portfolios.First Citizens' ratings could be downgraded if missteps emerge in the integration and conversion process that weaken its profitability, if its capital or liquidity levels meaningfully deteriorate, or if it displays a notable increase in its risk appetite (including via making another material acquisition before it completes the integration of CIT).The following rating actions were taken:Upgrades:..Issuer: CIT Bank, N.A..... Adjusted Baseline Credit Assessment, Upgraded to baa1 from baa3.... Baseline Credit Assessment, Upgraded to baa1 from baa3.... LT Counterparty Risk Assessment, Upgraded to A3(cr) from Baa2(cr).... ST Counterparty Risk Rating (Foreign Currency), Upgraded to P-2 from P-3.... ST Counterparty Risk Rating (Local Currency), Upgraded to P-2 from P-3.... LT Counterparty Risk Rating (Foreign Currency), Upgraded to Baa1 from Baa3.... LT Counterparty Risk Rating (Local Currency), Upgraded to Baa1 from Baa3.... LT Issuer Rating (Local Currency), Upgraded to Baa2 from Ba1, Stable from Ratings Under Review.... LT Deposit Rating (Local Currency), Upgraded to A2 from Baa1, Stable from Ratings Under Review.... ST Deposit Rating (Local Currency), Upgraded to P-1 from P-2.... Senior Unsecured Bank Note Program (Local Currency), Upgraded to (P)Baa2 from (P)Ba1.... Subordinate Bank Note Program (Local Currency), Upgraded to (P)Baa2 from (P)Ba1.... Senior Unsecured Regular Bond/Debenture (Local Currency), Upgraded to Baa2 from Ba1, Stable from Ratings Under Review..Issuer: CIT Group Inc.....Pref. Stock Non-cumulative (Local Currency), Upgraded to Ba1 (hyb) from Ba3 (hyb)....Subordinate Regular Bond/Debenture (Local Currency), Upgraded to Baa2 from Ba1....Senior Unsecured Regular Bond/Debenture (Local Currency), Upgraded to Baa2 from Ba1, Stable from Ratings Under Review..Issuer: CIT Group Inc. (Old) (Assumed by CIT Group Inc.)....Senior Unsecured Regular Bond/Debenture (Local Currency), Upgraded to Baa2 from Ba1, Stable from Ratings Under ReviewDowngrades:..Issuer: First Citizens BancShares, Inc.....Senior Unsec. Shelf (Local Currency), Downgraded to (P)Baa2 from (P)Baa1....Subordinate Shelf (Local Currency), Downgraded to (P)Baa2 from (P)Baa1....Pref. Shelf (Local Currency), Downgraded to (P)Baa3 from (P)Baa2....Pref. shelf Non-cumulative (Local Currency), Downgraded to (P)Ba1 from (P)Baa3....Pref. Stock Non-cumulative (Local Currency), Downgraded to Ba1(hyb) from Baa3(hyb)....Subordinate Regular Bond/Debenture (Local Currency), Downgraded to Baa2 from Baa1..Issuer: First-Citizens Bank & Trust Company.... Adjusted Baseline Credit Assessment, Downgraded to baa1 from a3.... Baseline Credit Assessment, Downgraded to baa1 from a3.... LT Counterparty Risk Assessment, Downgraded to A3(cr) from A2(cr).... ST Counterparty Risk Assessment, Downgraded to P-2(cr) from P-1(cr).... LT Counterparty Risk Rating (Foreign Currency), Downgraded to Baa1 from A3.... LT Counterparty Risk Rating (Local Currency), Downgraded to Baa1 from A3.... LT Issuer Rating, Downgraded to Baa2 from Baa1, Stable from Ratings Under Review.... LT Deposit Rating (Local Currency), Downgraded to A2 from A1, Stable from Ratings Under ReviewAffirmations:..Issuer: First-Citizens Bank & Trust Company.... ST Counterparty Risk Rating (Foreign Currency), Affirmed P-2.... ST Counterparty Risk Rating (Local Currency), Affirmed P-2Confirmations:..Issuer: CIT Bank, N.A..... ST Counterparty Risk Assessment, Confirmed at P-2(cr)..Issuer: First-Citizens Bank & Trust Company.... ST Deposit Rating (Local Currency), Confirmed at P-1Outlook Actions:..Issuer: CIT Bank, N.A.....Outlook, Changed To No Outlook From Rating Under Review..Issuer: CIT Group Inc.....Outlook, Changed To No Outlook From Rating Under Review..Issuer: First Citizens BancShares, Inc.....Outlook, Changed To Stable From Rating Under Review..Issuer: First-Citizens Bank & Trust Company....Outlook, Changed To Stable From Rating Under ReviewThe principal methodology used in these ratings was Banks Methodology published in July 2021 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1269625. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.REGULATORY DISCLOSURESFor further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1288235.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.The below contact information is provided for information purposes only. Please see the ratings tab of the issuer page at www.moodys.com, for each of the ratings covered, Moody's disclosures on the lead rating analyst and the Moody's legal entity that has issued the ratings.REFERENCES/CITATIONS[1] Form 8-K (SEC) 04-Jan-2022Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating. Joseph Pucella Senior Vice President Financial Institutions Group Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Andrea Usai Associate Managing Director Financial Institutions Group JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Releasing Office: Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. 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