SVB slump roils global financial stocks

SAN FRANCISCO: Shares in Silicon Valley Bank (SVB), a key lender to technology start-ups, plummeted as investors moved to withdraw their deposits, the media reported.

The slide came after the bank announced a $1.75bn share sale to help shore up its finances.

Uday Kotak, CEO, Kotak Mahindra Bank, tweeted, “Overnight developments in US banking: markets, analysts, investors underestimate the importance of financial stability for the balance sheet of a bank. When interest rates move up 500 bps from zero in a year, an accident was waiting to happen somewhere.”

Shares in banks have fallen around the world - with the four largest US banks, including JP Morgan and Wells Fargo, losing more than $50bn in market value, the report said.

One venture capitalist said the day’s events were “wild” and “brutal”, it said.

On Friday, shares in Asian banks were also trading lower.

Shares in SVB saw their biggest one-day drop on record as they plunged by more than 60 per cent and lost another 20 per cent in after-hours trade.

The firm launched the share sale after losing around $1.8bn when it offloaded a portfolio of assets, mainly US Treasuries.

But more concerning for the bank is the aspect of some startups who have money deposited have been advised to withdraw funds.

Hannah Chelkowski, founder of Blank Ventures, a fund that invests in financial technology, said the situation was “wild”. She is advising companies in her portfolio to withdraw funds.

“It’s crazy how it’s just unravelled like this... The interesting thing is that it’s the most start-up friendly bank and supported start-ups so much through Covid. Now VCs are telling their portfolio companies to pull their funds,” she said.

“It’s brutal,” she added.

A crucial lender for early-stage businesses, SVB is the banking partner for nearly half of US venture-backed technology and healthcare companies that listed on stock markets last year, the report said.

In the wider market, there were concerns about the value of bonds held by banks as rising interest rates made those bonds less valuable.

Central banks around the world - including the US Federal Reserve and the Bank of England - have sharply increased interest rates as they try to curb inflation, the media reported.