The American Silicon Valley Bank (SVB) falls sharply and pulls down the entire sector as well. The bank, whose main activity is granting loans to start-ups, announced the issuance of shares for 1.75 billion dollars and the sale of securities worth billions of dollars at a loss price. The bank’s stock is now plunging by more than 50%.
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The bank mainly suffers from a sharp decrease in the volume of deposits from start-ups, which for their part are having difficulty raising funds from venture capital funds. This, against the backdrop of the Fed’s continuous interest rate hikes over the past year, in order to fight inflation.
In addition, the bank earlier today lowered forecasts for the coming year after Moody’s cut its rating.
Following the report, the four largest US banks lose $47 billion of their market value during the trading day. Wall Street investors seem to have been spooked by the decision of SVB Financial Group to sell a large part of its securities portfolio at a large loss.
According to the Wall Street Journal, JP Morgan lost about $20 billion in market value, Bank of America lost about $15 billion, the market value of Wells Fargo decreased by 8.5 billion dollars and of Citigroup decreased by 3 billion dollars.
According to a Reuters report, SVB participates in almost half of the financial flows to start-up companies in the fields of technology and biomed in the USA.
SVB’s troubles come after another American bank announced the end of its operations last night. The second largest crypto bank in the US, Silvergate, announced the cessation of its operations. Silvergate had deep ties to the FTX crypto exchange that collapsed a few months ago.