After the fall in the Silicon Valley Bank and turbulence at the crypto bank Silvergate, problems are also feared elsewhere. Are these just isolated cases and exaggerated worries, or is there a risk of infection?
Problems at the US Silicon Valley Bank (SVB) also left their mark in Europe on Friday. After the stock exchanges in Asia had already come under pressure in the wake of the SVB shares, the sell-off in European financial stocks continued. Some experts warn against spreading the US start-up financier’s problems to the entire sector.
Despite this, the prices of European bank stocks followed the guidelines from the USA. The banking index slipped by a good four percent. At the end of the Dax, shares in Deutsche Bank lost 7.6 percent and Commerzbank 4.2 percent in the morning. Stocks such as Santander and Credit Suisse also fell significantly. The stock exchanges fear that similar problems could also arise in Europe.
SVB, which specializes in financing start-ups, had surprisingly announced that it would issue shares after a major sale of assets such as government bonds and mortgage securities resulted in a loss. The value of such securities falls when interest rates rise. SVB papers posted a drop of a good 60 percent on Wall Street on Thursday. The sell-off continued on Friday with a premarket drop of 44 percent.
Crypto bank Silvergate decides to liquidate
And a second piece of news from the financial world shocked investors: the crisis in the market for digital currencies such as Bitcoin and Ether has brought another heavyweight in the industry to its knees, the financial group Silvergate Capital. The crypto bank had announced that it would cease operations and voluntarily initiate settlement. Against this background, investors sold bank stocks in general.
Silvergate and SVB “are indeed victims of the same phenomenon as US monetary tightening is siphoning the scum out of the most surplus parts of the economy – and it’s hard to find more surplus than in crypto and tech startups” , said Vital Knowledge analyst Adam Crisafulli.
“The Silicon Valley Bank still seems to be an isolated case,” emphasized fund manager Thomas Altmann from asset manager QC Partners. “But previous crises have shown how great the risk of contagion among banks is. That’s why investors are reacting so sensitively to the news from California.” Another dealer spoke more of a mood dampener. However, the problems of the SVB are not a direct indicator for the sector.
Chief strategist Joachim Klement from the investment bank Liberum Capital spoke of growing fears of a credit crunch. However, he does not believe that the SVB situation poses an immediate threat to the European banking system. The US institute has a very special business model and specializes in venture capital and the financing of young growth companies. This is quite unique within the banking scene. Non-performing loans are likely to increase this year, but the reserves of banks in Europe and the US are sufficient to absorb problems.