SVB extends swoons on bank run fears and analyst downgrades as it triggers bank stock losses


SVB Financial Group stock tumbled more than 42% in premarket trades Friday on fears of a run on the bank, as analysts downgraded the company and reports surfaced of funds advising clients to pull their money from the parent company of Silicon Valley Bank.

Founders Fund, the San Francisco-based venture-capital fund co-founded by Peter Thiel, has advised companies to pull their money, according to a Bloomberg News report citing people familiar with the matter.

In a separate development, The Wall Street Journal reported that SVB Financial Group took out $15 billion of loans from the Federal Home Loan Bank of San Francisco at the end of 2022, compared to zero in the year-ago period, to assure liquidity.

The bank pledged collateral of about three times what it borrowed to back the advances, the WSJ reported, around the same time it sustained a 13%, or $25 billion decline in deposits in the final three quarters of 2022, the WSJ reported.

The steep losses Friday came after SVB Financial
ended down 60% in the regular trading day after it disclosed large losses from securities sales and announcing a dilutive stock offering along with a profit warning.

The bank was unprepared for rising interest rates which have hit its net interest income and net interest margin.

The developments triggered losses among bank stocks amid fears that other banks may find themselves in a similar position.

On Thursday the KBW Bank Index
fell 7.7%, while the S&P 500
dropped 1.9%.

J.P. Morgan analyst Vivek Juneja said Friday the large bank sell-off was “overdone” given the liquidity of bigger institutions.

“They are more diversified with broader business models, have a lot of capital, are much better managed in regards to risk, and have a lot of oversight from regulators,” Juneja said.

Raymond James analyst David L. Long downgraded SVB Financial to market perform from outperform on a litany of issues around the bank including: worsening cash burn from deposit outflows and uncertain timing of a rebound in private equity and venture capital deal volume.

The bank also faces a tighter net interest margin (NIM) outlook because of a fresh increase in interest rates and rate hike expectations, as well as dilution to its earnings per share from its planned $2.25 billion capital raise.

He also cited an increase in the risk of incremental NIM contraction and lower client fund balances.

Truist Securities analyst Brandon King cut SVB Financial group to a hold rating from a buy because the bank faces “too much uncertainty with deposits at risk,” he said in a Friday research note.

“The stock reaction today is evident of concerns around the bank’s liquidity and the potential for hold-to-maturity (HTM) securities sales, which could severely impair tangible capital and profitability,” King said. “Given these risks, we suggest that investors wait on the sidelines until there is more clarity on deposit outflows and the proposed capital raise of $2.25 billion.”




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