Bank Stocks Continue to Fall Following Silicon Valley Bank (SIVB) Fiasco
For the second day in a row, SVB Financial Group (NASDAQ:SIVB), also known as Silicon Valley Bank or SVB, is in the headlines. The troubles surrounding SVB are making investors nervous, and some bank stocks are under pressure today. Still, the…
For the second day in a row, SVB Financial Group (NASDAQ:SIVB), also known as Silicon Valley Bank or SVB, is in the headlines. The troubles surrounding SVB are making investors nervous, and some bank stocks are under pressure today. Still, the banking sector may be able to avoid a major crisis.
SVB is heavily invested in bonds, and as you probably know, interest rates on bonds are higher than they’ve been in a long time. Bond prices, which move inversely to bond yields, are, therefore, unusually low.
Russ Mould, investment director at U.K.-based broker A.J. Bell, explained how the deteriorating value of SVB’s bond portfolio isn’t only one bank’s problem. The “SVB situation is a reminder that many institutions are sitting on large unrealized losses on their fixed-income holdings,” Bell observed.
Hence, the financial sector is getting sold off as SVB’s issues get top billing in the headlines. So, let’s see how extensive the share-price damage is.
What’s Happening With Bank Stocks?
Suffice it to say SVB’s investors probably aren’t in a great mood right now. SIVB stock plunged 60% yesterday and then declined an additional 62% in the premarket hours today.
Trading of SVB shares was halted before the market’s opening at 8:30 a.m. and was still halted as of 10:30 a.m. Eastern. However, shares probably would have been priced at around $40. Meanwhile, shares of Citigroup (NYSE:C) and Bank of America (NYSE:BAC) were down by less than 1%. Moreover, JPMorgan Chase (NYSE:JPM) and Wells Fargo (NYSE:WFC) stocks are actually in the green. Why aren’t investors panicking, though?
Perhaps, Wall Street isn’t very worried about SVB’s issues spreading and causing a major banking crisis. For example, Morgan Stanley analysts assured, “Current pressures facing SIVB are highly idiosyncratic and should not be viewed as a read-across to other banks we cover.”
JPMorgan analyst Vivek Juneja sees the selloff in financial stocks as “overdone.” Big banks, Juneja points out, have a great deal of capital and liquidity and are well-diversified beyond bonds.
Additionally, Bank of America analyst Ebrahim Poonawala noted that banks aren’t generally over-leveraged. Poonawala stated: “Banks are coming into this period with a relatively low loan-to-deposit ratio of 69% at YE22 vs. 80% pre-pandemic.” So, even as SIVB stock swoons, there might not be a broad-based financial-sector washout in progress.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
David Moadel has provided compelling content – and crossed the occasional line – on behalf of Motley Fool, Crush the Street, Market Realist, TalkMarkets, TipRanks, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.
More From InvestorPlace
- Buy This $5 Stock BEFORE This Apple Project Goes Live
- The Best $1 Investment You Can Make Today
- It doesn’t matter if you have $500 or $5 million. Do this now.
The post Bank Stocks Continue to Fall Following Silicon Valley Bank (SIVB) Fiasco appeared first on InvestorPlace.