Summary:
- As of Dec 31, 2022, SVB had total assets of $209 Billion, total client deposits of $175.40 Billion and total outstanding Loans of $74 Billion
- SVB Stock Price fell by 60.41% to $106.04 on March 09, 2023
- Total Number of Employees: 6,567
- SVB CEO, Greg W Becker reduced his ownership by 11% by selling 12,451 shares in the company
- On 14 Feb 2022, Forbes featured SVB Financial as the 20th Best Bank in the USA
Investors watching Silicon Valley Bank (SVB) with trepidation in recent weeks have evoked memories of the 2008 financial crisis. As the tech-focused lender’s share price drops to historic lows, many are left wondering if this is another Lehman Brothers moment. With economic uncertainty compounded by a global pandemic, understanding what’s happening at SVB and how it could affect your investments is more important than ever.
What caused Silicon Valley Bank Collapse?
In 2008, banks took a dive due to risks associated with subprime mortgages. Fast-forward 12 years, and we’re in for the same song’s second verse – interest rate bets gone wrong! Banks, like SVB, had their depositors funded by VCs at rock bottom rates while hoping that those same interest rates stayed low or went lower still; but when they instead increased… well, it’s not looking so rosy. And unfortunately, SVB isn’t alone here either –California-based Silvergate Capital (SI) failed earlier this month too.
SVB Financial is now facing unforeseen difficulties related to high-risk investments in non-public companies, wineries, venture capital opportunities, and bonds with prolonged maturities.
SVB Financial Group’s $1.25 billion share sale, which included an extra $500 million purchase from General Atlantic, had depositors running for the hills when it was announced around the same time Silvergate Capital went insolvent. To make matters worse, they also planned to raise another half-billion through Convertible Bonds – talk about a stressful situation! All this resulted in a massive bank run.
What next?
On Monday, 13 March 2023, the FDIC will provide $250,000 to all depositors of SVB Bank. Those with more than this amount in deposits will have to wait until funds are received from the receivership’s liquidation process or unless government intervention takes place again next week. Speculation is growing over which financial institutions may be facing a similar fate as reports show some regional bank stocks declining substantially – hinting at an old-fashioned “bank panic”. Nevertheless, U.S.’s largest banks remain well safeguarded due to changes made after 2008’s global economic crisis, paving the way for continued stability and security within our financial system.
Moving Forward
We had a not-so-friendly reminder of the 2008 financial crisis with the biggest bank failure in recent US history. Investors should take caution – stock prices aren’t begging you to buy! But if you’re feeling bold, now could be your chance: some reputable banks have recently taken significant dives that may be worth checking out. Ironically, the financial sector is the one that benefits the most from rising interest rates.
