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Silicon Valley banks drop another 45%, weighing on banking sector again

shares of SVB Financial GroupKnown as Silicon Valley Bank.

SVB CEO Greg Becker called customers Thursday night to assuage their concerns after the stock plunged 60%, CNBC learned. The stock fell another 45% in Friday’s pre-market trading.

of SPDR S&P Regional Banking ETF An 8% drop on Thursday was followed by another 1.5% drop on Friday.of Financial Select SPDR Fund It fell 1.25% following Thursday’s 4% drop. signature bankKnown for serving the crypto sector. First Republic Bank It was 3% following Thursday’s 17% decline.

Big banks were also under pressure JP Morgan Chase After a 5% drop on Thursday, it fell another 1% early on Friday.

“The current pressures facing SIVB are highly idiosyncratic and should be viewed as a read-through to other banks,” Morgan Stanley analysts Mannan Gosalia and Betsy Grassek said in a report on Friday. not,’ he wrote.

Concerns among founders and venture capital investors surged earlier this week after Silicon Valley Bank surprised the market late Wednesday by announcing it needed to raise $2.25 billion in equity. , was forced to sell all of its available bonds at a loss of $1.8 billion as the startup’s customers withdrew their deposits.

The news comes on the heels of the collapse of crypto-focused cryptocurrencies silver gate A wave of withdrawals hit again on Thursday as VCs instructed their portfolio companies to move money, according to a person familiar with the matter.

SVB’s clients said they lost confidence after Becker urged them to “calm down” in a call on Thursday afternoon, and the stock’s decline continued unabated, reaching 60% by the end of trading. .

The SVB said in a letter from Becker on Wednesday that it had sold “substantially all” of its available-for-sale securities, which consisted primarily of US Treasuries.

Banks also previously reported more than $90 billion in held-to-maturity securities, but won’t necessarily incur losses unless forced to sell them before maturity to cover fugitive deposits. Government bonds are declining in value as the Institutional Board consistently raises interest rates. For example, the iShares 20+ Treasury Bond ETF, which consists of long-maturity government bonds, is down 24% over the past 12 months.

Investors are also worried about the lack of support from Silicon Valley Bank’s tech start-up funding base, which has been hit hard by the stock market slump and soaring interest rates. Peter Thiel’s Founders Fund and other large venture capital firms have asked their companies to withdraw funds from his SVB. Bloomberg News reported.

Morgan Stanley analysts said, “Decreased VC funding activity and increased cash burn are unique pressures for SIVB clients, reducing total SIVB client funds and on-balance sheet deposits. “That said, we have always believed that SIVB has sufficient liquidity for deposit outflows related to cash burns of venture capital clients.”

The market value of SVB was $16.8 billion until the end of last week. On Thursday, the bank was valued at $6.3 billion, and that value was set to drop further when trading began Friday.

This is a developing story. Please check the latest information.

Correction: The Financial Select SPDR Fund fell 4% on Thursday. In previous versions, the dates were listed incorrectly.

SIVB shares continue to fall as VCs withdraw funds from banks

https://www.cnbc.com/2023/03/10/silicon-valley-bank-tumbles-for-a-second-day-weighing-on-the-bank-sector-again.html Silicon Valley banks drop another 45%, weighing on banking sector again

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