(News Bulletin 247) – The SVB bank, which specializes in financing tech companies, suffered heavy losses after having to urgently sell billions of dollars of financial securities. The entire banking sector is under pressure.

For the past few days, the financial sector has been shaking in the United States. On Wednesday evening, the Californian bank Silvergate Bank, known for its proximity to cryptocurrencies, announced its liquidation, swept away by the collapse of the FTX digital currency trading platform.

But since Thursday it is the difficulties of another bank that have shaken all the markets, especially the American ones. Silicon Valley Bank (SVB), an institution specializing in financing technology companies, is suffering. According to Reuters, SVB is the banking partner for nearly half of US venture-backed startups that went public in 2022.

This establishment had to urgently sell 21 billion dollars of bond securities, which led it to suffer a loss of 1.8 billion dollars and its parent company, SVB Financial Group, was forced to proceed urgently a capital increase of 2.25 billion dollars.

SVB sees its deposits melt like snow in the sun. “Peter Thiel’s Founders Fund [un célèbre milliardaire américain] and other major venture capitalists (have) advised companies in their portfolio to withdraw their money” from this establishment, explains John Plassard, of Mirabaud.

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French banks rolled

SVB Financial Group fell 60.4% on Wall Street on Thursday and lost another 22% in post-close trading. The whole of the American banking sector has been swept along in its wake. The KBW Bank index lost around 7%, with significant declines in big names such as JP Morgan (-5.4%) or Bank of America (-6.2%). According to Reuters, US banks wiped out more than $80 billion in market capitalization on Wall Street.

European banks are hardly spared. This Friday Societe Generale fell by 5.35%, BNP Paribas by 4.6% and Crédit Agricole SA by 3.4%, causing the CAC 40 to fall by 1.8%, to 7,185.24 points. In Frankfurt, Deutsche Bank lost 7.4% while in London, Barclays dropped 5.8%.

This “small panic was triggered on the theme of the bankrun”, a chain reaction which begins with massive withdrawals of customers, explains to AFP David Bénamou, director of investments of Axiom Alternative Investments.

Impact of rate hikes

But according to a note from SPI Asset Management analyst Stephen Innes, “the risk of a capital or liquidity incident among the big banks is…low.”

Even if SVB had a particular business model, geared towards venture capital, its difficulties are linked to the rise in interest rates on the markets, in connection with the tightening of key rates by the major central banks. Hence the global fear of the market.

“Considering that customer cash outflows are also likely due to rising interest rates, it is no exaggeration to say that this episode is emblematic of the regime of higher and more longs that seem to be in the making, as well as inverted curves and a tech venture capital industry that’s had a lot tougher times lately. The perfect storm of all the things we’re worried about in this cycle,” says Deutsche Bank.

Exane bank analysts quoted by Reuters nevertheless consider that the problems of SVB Financial Group are not part of a systemic problem and there should thus “be no contagion or repercussions on European banks”, they judge.