SVB shares fell by 70% trading stopped-Budrigantrade Review

Budrigantrade.com - As a crisis at the tech-heavy lender rippled through global markets and hit banking stocks, sources familiar with the situation said on Friday that SVB Financial Group was evaluating its options, including a sale, after its attempts to raise capital through a stock sale failed.

After falling as much as 70% earlier in premarket trading, shares of SVB were stopped on Friday.

Silicon Valley Bank, also known as SVB, could not immediately be reached for comment.

The brutal decline in the lender's stock that began on Thursday spread to other U.S. and European banks, raising concerns about the sector's vulnerability to rising interest rates and hidden risks.

After a decline of 6.6% on Thursday, the banks index decreased by 4.2% on Friday, while the KBW Regional Banking index decreased by 5.3%. The STOXX banking index in Europe was down almost 5%, its biggest one-day drop since March 2022. The majority of major lenders saw declines, including Deutsche Bank (ETR:), which was down 6.1%. down 9.2%.

The issues at SVB demonstrate how the market is becoming vulnerable as a result of the Federal Reserve's and other central banks' efforts to end the era of cheap money and fight inflation. The innovation area has been hit hard in the beyond couple of months and stress has showed up in different corners of the market as rates rise.

Friday's solid job growth in February likely ensured that the Federal Reserve will keep raising interest rates for the foreseeable future.

Ronald Temple, chief market strategist at Lazard (NYSE:), stated, "The volatility we are seeing among some of the banks is a reminder that sharp increases in interest rates will increase areas of fragility."

The emergency at SVB began before this week when the bank, which loans intensely to tech new businesses, sent off an offer deal to support its monetary record subsequent to selling a portfolio comprising for the most part of U.S. Depositories at a loss.

On Thursday, people with knowledge of the situation said that some startups had advised their founders to withdraw their funds from SVB as a precaution.

Most of the time, banks put a lot of money into government bonds, especially those of their home country. The price of these bonds has fallen as a result of rising interest rates, which has fueled investor concerns that other banks may also be at risk.

Recently, the Government Store Protection Corp said U.S. banks confronted a sum of about $620 billion in hidden misfortunes on their protections property toward the finish of 2022.

However, experts in banking stated that SVB's problems were unique and that concerns about the sector as a whole were unfounded.

The market's impulsive response to this risk appears excessive. However, "sector earnings are likely to be impacted by rising costs of deposits and possible deposit withdrawals," according to a note from Mark Haefele, Chief Investment Officer at UBS Global Wealth Management.

Nevertheless, some banks issued statements that had not been seen since the financial crisis in an effort to reassure the market. ETR:, Commerzbank For instance, one of the largest banks in Germany downplayed any threat posed by SVB, stating that it did not perceive "a corresponding risk for us."

Antoine Bouvet, senior rates strategist at ING in London, stated that "the market is treating this as a potential contagion risk."

Over the course of the past year, the Federal Reserve increased U.S. rates by 450 basis points from close to zero, while the European Central Bank increased rates for the euro zone by 300 basis points, resulting in the fastest rate of increase in global borrowing costs in decades.

Even more has been done by many developing economies and other parts of Europe.

According to Markets.com's Chief Market Analyst Neil Wilson, the SVB incident may be the "straw that breaks the camel's back" for banks in light of concerns about the fragile U.S. economy and ever-increasing interest rates.