Silicon Valley Bank suffered a 60% drop in its shares on Thursday and extends through Friday in the premarket with drops of 46%. The collapse of the technology-oriented bank began when the entity decided to go out and sell a large part of its portfolio of bonds at a loss and to increase capital after a drop in deposits was known.
In one day the bank lost one third of its capitalization due to investor migration. The interconnectedness of the banking system meant that during the openings on Friday all the global stock markets were impacted by the Silicon Valley decision.
The entity linked to technology companies launched a sale of shares for US $ 1,750 million to shore up his balance sheet, and communicated that he needed the earnings to “plugging a hole” of $1.8 billion caused by the sale of a $21 billion portfolio of securities at a loss, and consisting mainly of US Treasury bonds The portfolio was giving him an average return of 1.79%, well below the current 10-year Treasury yield of around 3.9%.
SVB, one of the leading lenders of technology and healthcare startupsSo it said that, as a result, it would post a $1.8 billion after-tax loss in the first quarter of 2023.
SVB investors then doubted whether the capital increase would be sufficient given the deteriorating fortunes of many tech startups those served by the bank. SVB Financial Group was quick to reassure its venture capital clients that their money was safe.
company shares collapsed to their lowest level since 2016and after the market closed on Thursday, shares fell another 26%.
In a separate agreement, SVB said private equity firm General Atlantic will buy its shares worth $500 million., according to Reuters data. Meanwhile, ratings agency Moody’s downgraded the bank’s long-term local currency bank deposit.
The SVB turmoil raised investor concerns about broader risks in the sector. The actions of First Republica San Francisco-based bank, plunged more than 16.5% after hitting the lowest level since October 2020, marking the second-biggest drop in the S&P 500 index. Zion Bancorp fell more than 12% and the SPDR S&P Regional Banking ETF it fell 8% after hitting its lowest point since January 2021.
Major US banks were also affected, with Wells Fargo quoting with subtractions of 6%, JPMorgan Chase 5.4%, Bank of America 6% less and Citigroup 4% down.
In all, Thursday’s drop wiped out more than $80 billion in stock value from the 18 banks that make up the S&P 500 Banks Index, including a $22 billion drop in the value of JPMorgan.
Source: Ambito
