Shares of Silicon Valley Bank (SVB) Financial Group (NYSE:SIVB) were in free fall (down 38%) as US markets squirmed in pre-open trade, (at the time of writing, Friday New York time), confounding investors already blindsided by the heavy losses and the consequent hit to the Wall Street banking sector during Thursday’s drama filled session.

The angst around SVB’s solvency bubbled over across the Atlantic and had spread as far as the ASX on Friday, Eastern Australian time.

All the major US indices have been, but The S&P 500 bank index (SPXBK) led losses, down well over 6.5% on the Thursday session in Wall St, while European banks led the selling from Paris to Geneva as the Euro-region’s main indices also fell.

Sensing blood in the water, Credit Suisse said in a note overnight that ‘fears about unrealised losses in banks’ bond portfolios,’ were behind the sharp falls in US bank share prices.
Urging action, the Swiss investment back called it “a buying opportunity for European banks.”

Maybe so, but for US and local investors the fragility of SVB caught many off gurad.

Known as the bank for emerging tech firms, SVB (think Silicon Valley Bank) could’ve made matters worse for itself and the wider markets by tossing its hat in the ring for an ill-advised and worse timed capital-raise. That call may’ve only fanned the flames, pumping gas on doubts about the shape of its balance sheet.

The SIVB share price was all over the shop in pre-US trading down just about half its value to near US$63, which if maintained, would represent its weakest start to a session since 2012.

Silicon vulnerable

This comes on the back of its 60% collapse during the Thursday session, stateside, exposing its soft underbelly to investors already shaken by the bank’s whacky idea ask investors for more than US $2 billion to help it out of spiralling hole in its bond portfolio.

When we last left the tottering lender, which carved out a name for itself as the preferred option for dazzling Silicon Valley start-ups, it was pleasing with its customers to hang in there, however, according to James Gerrish of Market Matters and Portfolio Manager at Shaw and Partners, there’s already been a number of high-profile VC funds that’ve asked their portfolio companies to get their money out.

On Friday at home, the ASX was staggered, down some 2.3%, with the big four banks and the influential financial sector weighing heavily as doubts continue to rise over SVB’s viability.

“This is the sort of left-field event that markets haven’t been thinking or pricing about that can create more meaningful moves – more so than the well-understood trajectory of interest rates,” Mr Gerrish said.


Update 12:36pm New York (04.36am Sydney)

US and Californian banking regulators have stepped in pretty quickly today.

The Federal Deposit Insurance Corp (FDIC) has assumed control of SVB deposits and been named by the California Department of Financial Protection and Innovation as the banks receiver after the state financial regulator shuttered SVB and hit pause on any withdrawls.

That’ll likely make it an anxious weekend in Silicon Valley for many of the VC-backed companies and their various brokers and stakeholders with cash tied up in SVB.

The FDIC says it has created the Deposit Insurance National Bank of Santa Clara, which now holds all the insured deposits from SVB.

The FDIC said in a press release sent out Friday morning that insured depositors ‘will have access to their deposits no later than Monday morning’, when SVB’s branches will also reopen, under the tight control of the regulator.

Alrighty. On with the weekend.