SVB meltdown triggers global drop in bank shares

(Reuters) – The failure of troubled tech-lender SVB Financial Groups efforts to raise capital through a stock sale rippled through global markets on Friday and sent shares of many banks tumbling.

Shares of SVB, which does business as Silicon Valley Bank, were halted on Friday after tumbling as much as 66% earlier in premarket trading. The rout, which began on Thursday, spread concern about hidden risks in the banking sector and its vulnerability to the rising cost of money.

The S&P 500 banks index dropped 0.63% on Friday after a 6.6% decline on Thursday, while the KBW Regional Banking index was down 2.3%. Europes STOXX banking index fell almost 5%, tracking toward its biggest one-day percentage slide since June 2022.

COMMENTS:

ERIKA NAJARIAN, BANK ANALYST, UBS SECURITIES, NEW YORK

The sector‘s knee-jerk reaction is understandable, but likely overdone. While the lion’s share of investors appreciated the uniqueness of SIVBs situation, investor concerns over deposit outflow and mix shift are still heightened . If investors are concerned about deposit flow, why punish the stocks who have sticky, operational retail checking deposits？

“In the era where funding and liquidity is a top concern, we think the money centers, especially JPMorgan Chase & Co would be the best place to ‘hide.’ And Bank of America‘s more than 6% decline in the stock feels too much for the institution that has one of the best and stickiest retail deposit bases in banking. Wells Fargo’s funding should have the least amount of ‘surge’ given its asset cap. And US Bancorps 7% decline is befuddling, given a very conservatively managed balance sheet.”

(Writing By John ODonnell, Noor Zainab Hussain and Paritosh Bansal; Additional reporting by Niket Nishant, Jo Mason, Marc Jones, Iain Withers and Yoruk Bahceli; Editing by Toby Chopra)