More risk ahead as some banks do not know how to invest and diversify, like the SVB which had a wrong portfolio arrangement. Better do an audit of all your bank accounts and get out of those banks that do not care about their customers and shareholders! [Anger]
@LMSunshine @Mrzorro @Aqa @Fenger1188 @GoodLife99 @rL @SirBahamut @HelenJanet @pekss @Korer @JC888 @melson
$SVB Financial Group(SIVB)$
$Signature Bank(SBNY)$
$Silvergate Capital(SI)$
SVB Plunged 60% - How to View Its Sale and Bank Sector?
@Tiger_comments：Powerful, historically well-run $SVB Financial Group(SIVB)$ plunged more than 60%, and $9.4 bln evaporated on Thursday. 1. Bank sector took a hit on Thursday Other banks were also affected and fell dramatically. $First Republic Bank(FRC)$ , a San Francisco-based bank, sank more than 16.5%, becoming the second-biggest decliner in the S&P 500 index. $Zions(ZION)$ dropped more than 12% and $SPDR S&P Regional Banking ETF(KRE)$ slid 8% after hitting its lowest point since January 2021. Major US banks were also hit, with $Wells Fargo(WFC)$ down 6%, $JPMorgan Chase(JPM)$ down 5.4%, $Bank of America(BAC)$ 6% lower and Citigroup Inc 4% lower. 2. What triggered the sell-off? To cope with cash burn caused by higher deposit rates and an expansion in lending activities, $SVB Financial Group(SIVB)$ announced the sale of loss-making US Treasuries and stocks to shore up its balance sheet. 1) Sale of US treasuries would cause $1.8 bln losses Silicon Valley Bank would lose $1.8 billion in the sale of$21 bln US treasuries and mortgage-backed securities. 2) Sale of $2.25 billion stocks to raise money In addition, the company sought to raise $2.25 billion through the sale of common and preferred stock, which was seen by Wall Street as a panic sell-off of assets and a violent dilution of equity. The announcement should have been a general press release to improve the company's balance sheet. However, the timing is so wrong. When the news of the cryptocurrency bank crash was still rolling on TV, Silicon Valley Bank with a 40-year history announced that it had incurred huge losses and needed financing. This will make the market speculate whether the big bank is suffering from a liquidity crisis, so it is desperate to raise money to get out of trouble. 3. Why did SVB need financing? SVB made wrong portfolio arrangement when it had abundant capital. Its cash-rich customers - start-up companies - also lack liquidity due to rate hikes. Back in pandemic period, SVB invested $91 billion of its deposits in long-term bonds such as US Treasuries. These bonds were originally very safe, but then the Fed raised interest rates one after another and 10Y Treasury yields roared to 3.9%.The bonds in SVB's hands depreciated significantly and losses were severe. Conclusion The market's greatest fear is that the bursting of the tech bubble will be transmitted to the US financial system. But some investors think that the market is over-reacting to the news. It might be a chance to bottom some bank stocks. How do you think of the bank crises of SVB and Silvergate? Are there more risks ahead? Or it's a chance to bottom bank stocks? Leave your comments to win tiger coins~
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