A new earthquake shook the world markets yesterday. And the epicenter of the earthquake must be found in a US bank, the Silicon Valley Bank (SVB), which on Thursday evidenced a strong liquidity crisis that led to its collapse of more than 60% on the Stock Market. The California-based entity has been forced to sell its bond portfolio (valued at about $21 billion) at a loss. Specifically, with red numbers of 1,800 million. The problem is that this sale was carried out to cover a significant outflow of deposits from its clients, mostly technology companies and start-ups.
This flight of deposits forced the US market regulator yesterday to suspend the listing of the entity, after its value on the stock market went from 15,000 to 6,000 million dollars in just a few hours.
The entity would not have even been able to cover the capital increase that it announced on Thursday to clean up its position, so rumors suggest that it would be evaluating its sale. “The problem is that now there is fear that customers will withdraw deposits, the risk of a possible liquidity crisis and the contagion effect on the sector,” Bankinter analysts indicate.
And investors have not wanted to wait to see the effects of this vicious circle. With the red numbers impregnating world banks, the Ibex-35 lost 1.47% at the close, below 9,300 points, with Sabadell leading the bottom of the table with a sharp fall of 5.11%. Bankinter and Santander lost 4.2% each, while BBVA lost 3.4% and Unicaja 4.6%. In total, a loss of 5,300 million euros of capitalization.
Fear of central banks
Added to all this nervousness yesterday was the publication of employment data in the US, with the creation of 311,000 jobs in February. The figure far exceeded the forecasts that pointed to the creation of 200,000 jobs.
Although it may seem like good news, the reality is that the data gives wings to the Federal Reserve (Fed) to be more aggressive with rate hikes if necessary. The big fear? That this scenario, which until now had favored the banks, now shows its ‘B-side’, as SVB and other regional entities that the US administration acknowledges that it has begun to monitor have shown precisely. It’s not just about the loss in value of their bond portfolios. If the mantra of ‘higher rates for longer’ ends up breaking the economy, bad debts could also become a problem for the sector.