SVB, the bank that 'finances' Silicon Valley, has a 'black Thursday': shares plummet 63%

The CEO of SVB Financial GroupGreg Becker, held a conference call this Thursday, March 9 and asked customers of Silicon Valley bankowned by SVB, to “keep calm” amid concerns about the bank’s financial position, according to a person familiar with the matter.

Becker made the approximately 10-minute call at around 11:30 a.m. San Francisco, California time. He asked bank customersincluding venture capital investors, that they support you in the same way that the financial institution has supported them for the past 40 years, according to a source who asked not to be identified because the information was private.

SVB, based in Santa Clara, California, said Wednesday that was conducting a $2.25 billion stock sale after suffering a significant loss on its portfolio, which included US Treasuries and mortgage-backed securities.

SVB shares plunged as much as 63 percent on Thursday, hitting their lowest level since August 2016.

US bank shares fall the most in nearly three years

The bank shares of USA fell the most in almost three years due to the fact that the concern about the consequences of the increase in interest rates weighs on the sector.

The KBW banking index plunged 7.7 percent, its biggest drop since June 2020.

SVB Financial Group was the biggest drop in the gauge, plunging 60 percent, after the Silicon Valley-based lender took steps to shore up its capital position following losses in its holdings.

Bank of America Corp., Wells Fargo & Co. and JPMorgan Chase & Co. all fell at least 5 percent.

The Silicon Valley Bank news is “the prevailing fear,” Gary Tenner, an analyst at DA Davidson, said in an interview. “Is this the dam that has burst with respect to more banks raising capital? Is there more to come?” he added.

The banks who accumulated loans and other investments when interest rates were low have seen the value of those assets erode amid rapidly rising rates designed by the Federal Reserve.

At the same time, bankers have to compete harder to keep savers from defecting. This means that banks have to pay more to keep customers instead or, in some cases, sell some of those underperforming assets at deep discounts to pay off depositors. For smaller regional and community banks, the loss of deposits can be severe and weigh heavily on profitability.

Silvergate Capital Corp. added to the sour sentiment, saying it plans to shut down operations and liquidate after the collapse of the cryptocurrency industry undermined the company’s financial strength.

“Bank shares were already trading poorly this week after KeyCorp warned of elevated deposit betas and the selling intensified on Thursday thanks to a double whammy from Silvergate and SVB Financial,” said Vital Knowledge founder Adam Crisafulli.

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Deborah Acker

I write epic fantasy; self-published via KDP. Devoted dog mom to my 10 yr old GSD, Shadow! DM not a priority; slow response at best #amwriting #author.

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