Following high interest rates, SVB Financial’s stock price fell by 60% due to promoting ‘bond sales’.
“The first sign of a crack in the US financial system”… Domestic banking stocks all fell at once too
A Silicon Valley bank suffered a huge loss following intense tightening by the US Federal Reserve. Following this, domestic banking stocks all fell at once as well.
On the 9th (local time) on the New York Stock Exchange, shares of JP Morgan Chase, the four largest banks in the United States, fell 5.41%, followed by Bank of America 6.20%, Wells Fargo 6.18% and Citigroup 4.10%. The market capitalization of these banks fell by a total of $52 billion (about 69 trillion won) in one day. SVB Financial, the holding company of Silicon Valley Bank, announced plans to sell bonds and issue new shares, triggering a dump in banking stocks. SVB Financial announced that it would raise $2.25 billion (about 3 trillion won) by selling bonds and issuing new shares to cover the loss, even after taking a loss of $1.8 billion (about 2.29 trillion won gain) after tax. As soon as the news broke, SVB Financial’s stock price dropped 60.41%.
Most of SVB Financial’s holdings were in US Treasuries, whose prices had fallen due to the Fed’s steep rate hikes. Bonds do not lose money if held to maturity. However, SVB Financial’s decision to sell bonds appears to be due to the recent increase in deposit raising.
The Wall Street Journal reported that “high interest rates have hit the bank’s customers, Silicon Valley startups and venture capitalists, who have increased their demand for cash and reduced bank deposit balances faster than expected.”
Market experts pointed out that a series of events, including the news of the liquidation of Silvergate, a virtual currency trading bank, the previous day could be a warning of a financial system crisis.
“SVB’s financial crisis is the first sign that there may be cracks in the financial system,” said Bill Smith, CEO of Smith Capital Management.
The fall in US banking stocks led to a decline in domestic banking stocks. In the stock market on the 10th, KB Financial finished trading at 49,700 won, down 1.97% from the previous day’s closing price. Shinhan Financial Group and Hana Financial Group fell 1.65% and 1.29%, and Woori Financial Group also fell 2.42%.