PARIS (Reuters) – The European banking sector was down sharply on the stock market on Friday, in the wake of the fall the day before the compartment on Wall Street, after the setbacks of the American bank SVB Financial Group which announced a surprise capital increase for face liquidity risk.

The bank, parent of venture capital firm Silicon Valley Bank, plunged 60% on Wall Street on Thursday, sending the S&P Banks Index down 6.6%.

In Europe, the Stoxx 600 banking index fell 4.18% in the morning on Friday, showing by far the largest sectoral decline.

In Paris, BNP Paribas fell 4.2%, Societe Generale lost 5.6% and Crédit Agricole dropped 3.7%.

Deutsche Bank lost 7.8% in Frankfurt, ING fell 5% in Amsterdam and Barclays dropped 4.3% in London.

In New York, fears around SVB have evaporated about 80 billion dollars in market capitalization of the 18 institutions making up the S&P 500 sector index, including 22 billion for the bank JPMorgan alone (-5.4%).

Other major Wall Street banks also suffered: Wells Fargo fell 6% and Citigroup 4%.

San Francisco-based First Republic Bank plunged 16.5% and hit its lowest since October 2020.

SVB on Wednesday launched a $1.75 billion capital raise to shore up its balance sheet.

In a document for investors, the company said it needed the funds to offset the loss of $1.8 billion caused by the sale of its bond portfolio, which consisted mainly of US Treasury bills worth $21 billion. of dollars. This portfolio provided him with an average return of 1.79%, well below the current yield on 10-year Treasury bills, which is around 3.9%.

This setback is linked to the Federal Reserve’s continued hike in interest rates over the past year in a context of high inflation.

Investors fear that SVB’s fundraising will be insufficient given the deteriorating cash flow of many tech start-ups the bank is funding.

SVB is the banking partner for nearly half of US venture-backed start-ups that went public in 2022.

CASH WITHDRAWAL

Some start-ups have advised their founders to withdraw their money from SVB as a precautionary measure, two sources familiar with the matter said.

Among them, the investment vehicle Founders Fund founded by Peter Thiel, creator of PayPal and Silicon Valley guru, according to one of the sources.

A San Francisco-based start-up told Reuters it managed to get all of its funds out of SVB on Thursday afternoon and were “pending” transfer to another bank account.

SVB did not respond to numerous requests for comment. Its price still fell by 26% in electronic transactions.

“While venture capital deployment was in line with our expectations, client cash burn remained high and increased further in February, resulting in lower than expected deposits,” explained SVB CEO Gregory Becker in a letter to investors seen by Reuters.

“We are taking these actions because we expect ever-higher interest rates, public and private markets under pressure, and high levels of cash burn from our customers,” he wrote in a statement. his letter.

According to two sources, the executive called customers to assure them that their money was safe.

(Ananya Mariam Rajesh and Niket Nishant in Bangalore, Tom Westbrook in Sydney, Noel Randewich in San Francisco, Matt Tracy in Washington, Krystal Hu, Nupur Anand, Chuck Mikolajczak and Megan Davies in New York, Blandine Hénault and Kate Entringer for the , edited by Matthieu Protard)

Copyright © 2023 Thomson Reuters