Silicon Valley Bank tumbles for a second day, weighing on the bank sector again
JPMorgan Chase"Current pressures facing SIVB are highly idiosyncratic and should not be viewed as a read-across to other banks," wrote analysts Manan Gosalia and Betsy Graseck with Morgan Stanley in a note Friday. "The funding pressures facing SIVB are highly idiosyncratic and should not be viewed as a read-across to other regional banks."
SVB said in a letter from Becker on Wednesday that it sold "substantially all" of its available-for-sale securities made up of mostly U.S. Treasurys. The bank said it was looking to raise $2.25 billion between common equity and convertible preferred shares. Investment fund General Atlantic has already committed to contribute $500 million.
The bank also previously reported more than $90 billion in held-to-maturity securities, which wouldn't necessarily incur losses unless it was forced to sell them before maturity to cover fleeing deposits. As the Federal Reserve consistently raises interest rates, it is lowering the value of Treasuries. For example, the iShares 20+ Treasury Bond ETF, which is made up of longer maturity Treasuries, is down 24% in the last 12 months.
Investors are also worried about lack of support from Silicon Valley Bank's funding base of tech start-ups, an area hit hard from the slumping stock market and surging rates.
SVB had a market value of $16.8 billion to end last week. On Thursday, the bank was worth $6.3 billion with that value set to drop even more when trading begins Friday.
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