Silicon Valley Bank SIVB - $270 to $30 in 48 hours

[njhowie]

Train wreck weighing on the banking sector.

 

[Freedom56]

It was $727 in November 2021.

 

[aja8888]

I'm expecting Yellen to come out now and tell us again how well capitalized and healthy the banking sector is these days.

 

[Car-Guy]

I'm expecting Yellen to come out now and tell us again how well capitalized and healthy the banking sector is these days.

Now that would be scary. Or worse, what if she and Powell (and maybe Dimon) all got together to tell us how healthy and well functioning the financial system is.

 

[athena53]

The investments I inherited from Dad in late 2021 included about $2,000 of Pac West Bankcorp. I held onto it. Oops. I imagine Dad bought it because a nephew worked there and he had a good impression of the company. (Yes, we are aware of the illegality of trading on inside information and are scrupulous about not communicating anything in that category.)

Glad I didn't buy more.

 

[Texas Proud]

I'm expecting Yellen to come out now and tell us again how well capitalized and healthy the banking sector is these days.

The big banks are very well capitalized...



I am sure there will be some regional or small banks that will go under, there always are when there is financial stress occurs, but back in 2008 it was the big ones that were the problem... they can handle the small ones...


https://www.fdic.gov/bank/historical/bank/

 

[11522914]

Wow, the ride in some bank stocks and preferreds are nothing short of amazing. I guess this is when you either pick up some much cheaper than yesterday shares or hold off believing this is the canary in the coal mine and sit back and watch.

For instance First Republic Bank FRC closed yesterday at 96.01, quickly dropped today to $46 and now stands at $90. Crazy. I hope somebody is making money with this craziness.

 

[njhowie]

Wow, the ride in some bank stocks and preferreds are nothing short of amazing. I guess this is when you either pick up some much cheaper than yesterday shares or hold off believing this is the canary in the coal mine and sit back and watch.

For instance First Republic Bank FRC closed yesterday at 96.01, quickly dropped today to $46 and now stands at $90. Crazy. I hope somebody is making money with this craziness.

Yes - you want to stay away from SIVB and similar, and pick up the strong ones that are being taken for a ride lower today for no other reason.

 

[yhoomajor]

https://www.cnbc.com/2023/03/10/sil...ulators-fdic-to-protect-insured-deposits.html

Silicon Valley Bank is shut down by regulators, FDIC to protect insured deposits

And we haven't even started seeing the side effects of CMBS (commercial MBS) getting stressed all over US. Would be wary of banks that hold CMBS on their books.

 

[Earl E Retyre]

https://www.cnbc.com/2023/03/10/sil...ulators-fdic-to-protect-insured-deposits.html

Silicon Valley Bank is shut down by regulators, FDIC to protect insured deposits

And this is why it is important to stay within the $250k per depositor FDIC limits

 

[Texas Proud]

And this is why it is important to stay within the $250k per depositor FDIC limits

Just an FYI, there are very few banks that all deposits are not covered... even over $250K... it might take you awhile to get it back but you usually do...

 

[bmcgonig]

Just an FYI, there are very few banks that all deposits are not covered... even over $250K... it might take you awhile to get it back but you usually do...

Where does the cover over 250 come from?

 

[NW-Bound]

To be fair, this is nothing like the subprime fiasco. SIVB's trouble stems from the loss of value of its long bonds. Yeah, how can you go wrong holding US Treasuries? It's solid, like the rock of Gibraltar. Right!

The problem with institutional investors is that they cannot deny reality like individual investors and say "You don't lose until you sell". Nope, they have to sell to meet obligations.

And for individual investors, the unrealized loss does not go away. It sits there on your portfolio, even if you try not to look at it.

 

[Another Reader]

Lots of problems for the small and medium businesses in California that banked with SIVB and can't make payroll today... The ripples will be substantial. The under $250k folks can line up on Monday and get their money out. Guessing the losses for some companies that are well over the limit will force them into bankruptcy.

 

[MichaelB]

According to its 3Q results (here) most of the customer deposits were in demand deposits, while most of the assets were in “hold to maturity” fixed income. A much smaller share was in loans and “available for sale” securities. They were unprepared for a run. This is not a capitalization issue, it’s a mismatch between assets and liabilities.

 

[Montecfo]

To be fair, this is nothing like the subprime fiasco. SIVB's trouble stems from the loss of value of its long bonds. Yeah, how can you go wrong holding US Treasuries? It's solid, like the rock of Gibraltar. Right!

The problem with institutional investors is that they cannot deny reality like individual investors and say "You don't lose until you sell". Nope, they have to sell to meet obligations.

And for individual investors, the unrealized loss does not go away. It sits there on your portfolio, even if you try not to look at it.

yep.

 

[bmcgonig]

It’s really a simple bank run issue. If the deposits stayed there the assets could theoretically mature and pay off the depositors.

 

[Go-NoGo]

FT has a very good analysis of the situation at SVB:

https://www.ft.com/content/7cf4eb45-78b7-4e6e-b134-1f0b082ba203

SVB is not a canary in the banking coal mine

.. First, few other banks have as high a proportion of business deposits as SVB, so their funding costs won’t rise as quickly. At Fifth Third, a typical regional bank, deposit costs only hit 1.05 per cent in the fourth quarter. At gigantic Bank of America, the figure was 0.96 per cent

Second, few other banks have as much of their assets locked up in fixed-rate securities as SVB, rather than in floating-rate loans. Securities are 56 per cent of SVB’s assets. At Fifth Third, the figure is 25 per cent; at Bank of America, it is 28 per cent.

Bottom line, SVB had a very large percentage of corporate customers who are very sensitive to interest rate hikes and want the best return on their deposits compared to say, a retail investor. That and the threat of solvency caused a run on the bank and SVB was done.

 

[jazz4cash]

I'm expecting Yellen to come out now and tell us again how well capitalized and healthy the banking sector is these days.

That’s exactly what she should be doing….assuming it is true, of course. Everything I’m hearing says SIVB is not representative of the banking sector. The tiny regional I own is down 2% today.

 

[W2R]

It’s really a simple bank run issue.

Gee, I hope we don't start having bank runs on many other banks too! I don't expect it, but always looking for worst case scenario.

I have some cash at my bricks & mortar bank, and other cash at a Vanguard MM fund. But, I haven't put any significant amount under my mattress, in mason jars in the kitchen cabinets, or buried in ammo boxes in the back yard.

 

[foxfirev5]

Every time downturns start it's just enough different from prior events to ignore it. Then when it hits we all realize we should have seen it coming.

However, since I know nothing the market doesn't, there is nothing actionable for me.

 

[explanade]

Saw a tweet that they had over $160 billion in deposits.

Of that total, only $4 billion were in accounts with balances under $250k, across like 107k accounts.

But the other $156 billion were in accounts with balances over $250, across just under 38k accounts.

CNBC was saying a lot of VCs had deposits there. Not sure why they'd choose a local or regional bank over bigger institutions. There are plenty of national bank branches all over the SCV.

But typically, the regional banks are offering more aggressive CD rates. I don't think these big balance accountholders were investing in CD accounts but maybe the bank offered aggressive interest rates?


Market has been up and down and now really down as it nears close. Can't believe it's only this one regional bank.

 

[pb4uski]

According to its 3Q results (here) most of the customer deposits were in demand deposits, while most of the assets were in “hold to maturity” fixed income. A much smaller share was in loans and “available for sale” securities. They were unprepared for a run. This is not a capitalization issue, it’s a mismatch between assets and liabilities.

Exactly... they misjudged how sticky their demand deposits were and they invested assets that were inappropriate given their liabilities.... pretty elementary mistake that we see happen time and again when financial institutions get stupid and greedy.

 

[PlayinwithFIRE]

Used to drive by SVB brnches when I lived out there. I even think I heard the name a few times in startups I worked at.

Im kinda curious...the VCs who seem to have made the bank run....what triggered them to do so all at the same time?

Wondering if they know something, or just got caught up in their polite society gossip over beers Thurs nite in Palo Alto.

 

[dunkelblau]

https://finance.yahoo.com/news/silicon-valley-bank-fdic-closed-largest-failure-financial-crisis-182643368.html

Regulators closed troubled Silicon Valley Bank after deposit outflows and a failed capital raise plunged the country's 16th largest bank into crisis, roiling the larger lending industry.

It became the largest bank to fail since Seattle's Washington Mutual during the height of the 2008 financial crisis and, behind Washington Mutual, the second largest bank failure in U.S. history. It is also the first bank to fail since 2020.

The bank had $209 billion in assets and $175.4 billion in deposits. The FDIC, which serves as a backstop for deposits at U.S. banks up to a limit of $250,000, said all insured depositors would have access to their funds "no later" than Monday morning.

Roughly 87% of Silicon Valley Bank's deposits were uninsured as of December 2022, according to its annual report.