8.05pm: SVB sued by shareholders for fraud
SVB and two of its top executives, CEO Greg Becker and CFO Daniel Beck, are being sued by shareholders, Reuters reported.
The shareholders are accusing the group of concealing how rising interest rates would leave its Silicon Valley Bank unit, which failed last week, “particularly susceptible” to a bank run.
In the lawsuit, shareholders said SVB “failed to disclose how rising interest rates would undermine its business model, and leave it worse off than banks with different client bases,” according to Reuters.
The lawsuit seeks unspecified damages for SVB investors between June 16, 2021 and March 10, 2023.
6.42pm: SVB’s downfall is a ‘sharp sting not mortal bite’
Bill.com, a cloud software company that automates accounts payable and accounts receivable processes for small and midsize businesses (SMBs), acknowledged over the weekend that it has exposure to Silicon Valley Bank.
Analysts at Canaccord Genuity (TSX:CF, LSE:CF), though, view SVB weakness as unlikely to be a long-term problem. The firm reiterated its ‘Buy’ rating and $175 price target.
The firm estimates that Bill Holdings has about $475 million of cash potentially at risk, but roughly $300 million of that is the company’s own cash deposit at the bank, rather than its customers.
“[Even if] Bill loses $500+ million of balance sheet cash, we view this as a sharp sting not a mortal bite by any means,” analysts said. “… We continue to believe that Bill represents a great way to invest in what is still a large greenfield in enabling SMBs to migrate to the world of automated, electronic payments. If there is material weakness in the stock as a result of the SVB situation, we would view this as a buying opportunity.”
Investors seem to believe so too, as shares of Bill Holdings Inc were up more than 8% to $74.28 on Monday afternoon.
5.25pm: Senate Banking Committee briefing last night did not include some Republicans
US Senate Republicans are being briefed on the SVB this afternoon by the Treasury Department, according to reports citing a spokesperson from Senator Tim Scott’s office. This comes after multiple Republican members of the Senate Banking Committee, of which Scott is a member, were not invited to a Treasury briefing Sunday night.
Meanwhile, the CEO of a startup with its money stored at SVB said his company would have shut down if not for US government intervention.
Stefan Kalb, who heads a Seattle-based startup called Shelf Engine, said the company would have shut down by the end of the week if only the FDIC-insured $250,000 had been returned to the company.
“$250,000 would have been nice to have starting today,” Kalb said, per CNN. “However, for us that means we would have to shut down by the end of the week. And the reason that’s the case is because we would have made payroll, and that doesn’t even really cover the full payroll for us.”
“As a co-founder and CEO, I’m personally liable for that payroll,” he added. “Which means that if I would have let our team work past Friday, I would have had to somehow cover that personally, and I just could not let that happen.”
3.30pm: Gold gets post-SVB lift
The SVB crash is proving to be a boon for gold prices as investors flee to safe haven investments.
The commodity added 1.8% overnight to £1,570 (US$1,910), its best price since February 3.
Digital gold, being bitcoin (BTC), continues to surge, adding nearly 10% US$24,200 on the BTC/USDT pair today, following a 7.5% Sunday surge.
With two-year yields almost down 1% in less than a week and the market increasingly pricing away the prospect for a rate hike, gold has to go higher,” said Ole Hansen, head of commodities strategy at Saxo Bank.
2.56pm: From the president’s mouth
Here’s a clip from CNBC of president Joe Biden’s speech on the collapse of Silicon Valley Bank:
President Biden stressed that “no losses will be borne by the taxpayers” in the U.S. rescue of Silicon Valley Bank deposits. @kaylatausche reports. https://t.co/cWfPODpUFb pic.twitter.com/Fcb1YhGPJq
— CNBC Politics (@CNBCPolitics) March 13, 2023
2.49pm: SVB woke?
Republican Representative James Comer has called out SVB for being too “woke”.
Some of the outrage seems to stem from Europe, Africa and Middle East chief risk officer Jay Ersapah’s crime of organising LGBTQ initiatives including a month-long Pride campaign while simultaneously juggling her job.
Anti-woke role model Elon Musk’s Twitter addiction, meanwhile, is apparently perfectly reasonable and has no bearing on Tesla’s huge recall problems.
SVB’s focus on ESG initiatives has also been a source of ire.
But in truth, how woke can a hypercapitalist venture capital-focused financial institution really be?
After all, nine of the 12-head US board of directors are blokes. As for the UK… Shock horror, the board is weighted more heavily toward women, what sort of woke outrage is this?
In fairness, a seven-member board makes absolute equality mathematically impossible.
Also, would a woke bank go eight months without a pencil-pushing bureaucratic chief risk officer, as was the case with SVB? Doubtful.
It is highly unlikely that SVB’s ill-advised long-dated investment strategy had anything to do with diversity and/or ESG initiatives.
2.16pm: Bank shares plummet, bonds and cryptocurrencies soar
Bank stocks in the UK and US continue to feel the ripple effects of the crisis-struck banking sector.
In the UK, FTSE 100 stalwarts Standard Chartered, Barclays, Lloyds and NatWest have all dipped over 4% apiece today, as have insurance firms Prudential and Aviva.
Regional US banks are feeling the worst of it, with Arizona-based First Republic Bank shares getting a -70% battering in early New York trades, while Utah-based Zions Bancorporation losing nearly a third of its market value.
On the flipside, mounting speculation that the US Federal Reserve will actually pause interest rate hikes this month is causing a bond bonanza.
US 10-year Treasury yields have dipped below 3.5% for the first time since early February, while two-year yields today fell nearly 50 basis points to 4.11%, also the lowest point since early February.
Bond yields and prices have an inverse relationship with each other.
In the UK, 10-year gilt yields fell 31bps to 3.32% while two-year gilt yields fell 38bps to 3.26%.
German 10-year bund yields dipped 30bps to 2.2%.
Cryptocurrencies are also having a strong session, with bitcoin (BTC) ramping up 2% to US$22,470 on the BTC/USDT pair, while the Ethereum-dollar pair hit a 10-day high of US$1,600.
Crypto initially plummeted amid the SVB fallout when large-cap stablecoin USD Coin (USDC) disclosed exposure to the bank, leading the stablecoin to depeg from the dollar. But a relatively swift rebound has injected some life back into the crypto market.
1.32pm: Biden on SVB: ‘That’s how capitalism works’
Taxpayers nor customers will feel the brunt of Silicon Valley Bank’s and Signature Bank’s failures, US president Joe Biden today announced.
Instead, the money will be sourced from fees that US banks pay to the Federal Deposit Insurance Corporation.
There were fears that the overwhelming majority of deposits were uninsured, but decisive action seems to have been taken.
Biden said: “All customers with deposits in these banks can rest assured, they’ll be protected and they’ll have access to their money as of today.”
“America can have confidence that the banking system is safe,” he said touting the “immediate action” taken by his administration.
Invoking the rhetoric of his predecessor Donald Trump, Biden then moved on to other matters.
“The management of these banks will be fired,” he stated, par the course for when a bank is taken over by the FDIC.
Investors in the bank are also out of luck, and “will not be protected” since they knowingly took a risk that didn’t pay off.
“That’s how capitalism works,” said Biden.
He said he would make those responsible for the debacle accountable before stating that regulations will be introduced “to make it less likely this kind of bank failure will happen again”.
Biden, however, faces a divided house, making the likelihood of passing new legislation tenuous.
1.14pm: Biden to speak on SVB collapse
US President Joe Biden is due to speak on the collapse of Silicon Valley Bank and wider issues facing the banking system at 1pm UK time.
Biden on Sunday said he will deliver remarks “on how we will maintain a resilient banking system to protect our historic economic recovery”.
However, an SVB bailout seems unlikely, given Federal Reserve chair Janet Yellen’s assertion that “we’re not going to do that again”, in reference to the 2008 financial crisis.
Biden hinted at new banking regulations, stating: “I am firmly committed to holding those responsible for this mess fully accountable and to continuing our efforts to strengthen oversight and regulation of larger banks so that we are not in this position again.”
SVB’s UK arm was bought for £1 by HSBC in a deal that chancellor Jeremy Hunt said “has protected both the customers of SVB UK and taxpayers”.
12.16pm: SVB fallout: ‘Too early to call the all-clear’
Silicon Valley Bank may have been an outlier in the financial sector in many ways, but it is “too early to call the all-clear” on the sector, reckon ING analysts.
Fears over market contagion in the sector stem from SVB’s strategy of holding poorly valued long-dated bonds, which needed to be cashed out for significant losses to satisfy client withdrawals.
This problem could be replicated in other firms, sparking worries among investors and customers.
However, while most banks hold Treasury notes, SVB employed far more of its deposit base in long-dated bonds than in writing loans, meaning “it was more susceptible than most banks to the performance of its bond portfolio”, explained ING.
Banks holding a lower proportion of bonds to loans, which is most, should be far less susceptible to the issues that brought about SVB’s collapse.
Regional US banks are most at risk due to a flight to larger, perceptively safer financial institutions.
Phoenix-based Western Alliance Bacorporation and San Francisco-based First Republic Bank have both fallen over more than 60% in market value in Monday’s early trades.
11.50am: Trustpilot has US$36mln tied up in SVB
Trustpilot has US$36mln (£20mln) in cash held with Silicon Valley Bank’s UK entity, the global review platform today disclosed.
US$18m is currently in transfer out of SVB, but is still pending confirmation.
The company confirmed that it has immediately accessible cash of US$24mln, representing a third of its total cash on the balance sheet.
“Given this morning’s news on SVB UK being sold to HSBC, the liquidity situation should be under control,” said broker Peel Hunt, though Trustpilot shares fell around 5.4% to 92.5mln following the announcement regardless.
Peel Hunt has forecasted full-year EBITDA losses of US$6.2mln in the build-up to Trustpilot’s preliminary results on March 21, or US$5,4mln in a best-case scenario.
11.18am: First Republic Bank’s market value halved
US wealth management firm First Republic Bank’s attempts to assuage fears over its exposure to Silicon Valley Bank have failed to stem significant losses to its share price this morning.
In a statement, First Republic said it has “further enhanced and diversified its financial position” with access to additional liquidity from the Federal Reserve Bank and JPMorgan Chase & Co (NYSE:JPM).
The additional funding was reported to increase the firm’s unused liquidity to US$70bn.
Despite reassurances, shares were seen 60% down to US$81.76 in pre-market trades as of 11.10am.
“It’s down to a sharp loss of shareholder confidence,” says Susannah Streeter at Hargreaves Lansdown to Reuters, adding: “The banks aren’t being bailed out, but depositors are, and worries about the viability of First Republic are growing… It’s highly likely that there has been a rush of more depositors withdrawing money.”
10.57am: Bond markets across the globe on a rally
Bond yields across the world are falling sharply as investors make a dash for safe havens following the three-headed collapse of SVB, Silvergate Bank and Signature Bank.
US 10-year dated note yields fell another 12 basis points overnight to 3.56%, marking a 10% dip across the past five days.
Bond yields have an inverse relationship with their underlying value.
In the UK, 10-year gilts fell 16 basis points overnight to 3.48%, marking a 9.6% dip across five days,
German bunds have performed even better, with 10-year note yields dropping over 14% to 2.3% in the past five days.
10.35am: Learning Technologies Group’s SVB exposure ‘is not material’ says broker
Learning Technologies Group PLC (AIM:LTG, OTC:LTTHF) has said the collapse of Silicon Valley Bank will have “no material effect on its financial position”.
Out of its £110.7mln cash reserve, the company had £9.4m deposited with SVB and £2.3m with SVB UK as of Marck 10.
Learning Technologies requested a withdrawal from SVB on Friday, of which it has received £300,000 m to date.
Peel Hunt noted the group’s diversified banking syndicate comprising Barclays, HSBC, Bank of Ireland (LSE:BKIR), Fifth Third Bank and SVB, of which SVP was the facility agent. A new facilities agent and lender will be pursued in due course.
It has a term loan of US$$255.4mln (of which SVB provided US$53.7m) and an undrawn revolving credit facility of US$50mln (of which SVB provided US$10.5m).
“Overall, the exposure to SVB is not material,” said Peel Hunt, in agreement with Learning Tech’s statement.
Shares fell 3.5% to 132.2p on Monday morning.
10am: SVB exposure: Who does and who doesn’t have exposure to collapsed bank?
The following London-listed groups have disclosed exposure to Silicon Valley Bank following the firm’s collapse. We’ll keep you updated as the news rolls in:
The following groups have said they have no exposure to SVB:
- Equals Group
- Tern PLC (AIM:TERN) (no direct exposure)
- Biopharma Credit Plc
- Science Group
9.45: Goldman Sachs (NYSE:GS) predicts SVB chaos will mean US rate rise is scrapped
Goldman Sachs (NYSE:GS) has predicted the US Federal Reserve will be forced to curb its plans to raise interest rates due to the fallout from the collapse of Silicon Valley Bank (SVB).
US regulators stepped in on Friday to shore up the beleaguered bank and guarantee deposits up to US$250,000, though there is still uncertainty over what happens to larger deposits and other creditors.
Analysts at Goldman expect the Fed will now postpone a rate hike expected for 22 March because of concerns about the impact of SVB’s failure on other banks.
Previously, the Wall Street giant had forecast US interest rates would rise by 25 basis points (0.25%) in March and though it still expects 25-basis-point hikes in May, June and July even this was no longer certain, it added.
Goldman said it now expects US interest rates to peak at between 5.25%-5.5%.
SVB’s customers should have access to their deposits from today, regulators said at the weekend, with a new facility set up to give banks access to emergency funds.
The Federal Reserve has also agreed to make funding available to banks in emergency cases.
This injection of liquidity should be sufficient to “provide substantial liquidity to banks facing deposit outflows and to improve confidence among depositors”, said Goldman.
9.20am: Bitcoin and Ethereum: Crypto responds to SVB, Signature Bank crisis
Bitcoin (BTC) had every right to a miserable weekend.
In a week that saw crypto-adjacent bank Silvergate Bank finally fold after months of speculation, followed by yet another collapse in the form of Silicon Valley Bank.
Concerns mounted when USD Coin (USDC), the second-largest stablecoin and fifth-largest cryptocurrency in general, depegged from the dollar after developer Circle disclosed exposure to SVB.
Since all good things come in three, another crypto-friendly financial institution, this time Signature Bank, entered into receivership on Sunday.
With the potent smell of Terra USD-style contagion hanging in the air, crypto investors had every right to exit their positions before the going got tough.
Here we go again, spectators though. Well, it didn’t quite end up way.
Bitcoin looked tetchy at first, especially after dipping close to the 20k mark on Thursday and finally crashing below the barrier on Friday.
But BTC/USDT fairly swiftly changed course, heading back above 20k on Saturday and roaring 7.5% higher to US$22,000 on Sunday.
This morning we’re seeing more bullish bitcoin action, with the BTC/USDT pair running upwards of US$22,300.
Bitcoin crisis? What crisis? – Source: currency.com
More crucially, USDC has just about reverted back to its dollar peg, staving off a large-scale crisis for now.
Perhaps as Hargreaves Lansdown equity analyst Sophie Lund-Yates told Bloomberg, it was all “a little bit of a storm in a teacup”.
There are of course valuation concerns on the equities market which could rub off on risky assets like bitcoin.
Furthermore, as Lund-Yates said, a further 50 basis point rate hike by the US Federal Reserve this month is all but a given, especially with persistently hot employment data.
Reuters analysts, for what it’s worth, have the opposing view.
Theoretically these facts should all act as crypto headwinds, but the market doesn’t seem to have got the memo.
US regulators may have actually saved crypto’s skin this time, given that the Federal Reserve, US Treasury, and FDIC banded together to ensure uninsured depositors (which made up around 95%) of SVB will be made whole.
This means SVB’s client base tech and venture funds shouldn’t lose their deposits, nor should they start withdrawing from other uninsured positions.
Mark Connors, head of research at crypto asset manager 3iQ, called the action “risk asset friendly at first blush”.
So the regulators actually saved crypto last week? Quite the plot twist.
Ethereum (ETH) similarly did a dip and recover on the ETH/USDT pair, falling as low as US$1,370 on Friday before bouncing back up to US$1,600 as of Monday morning.
ETH has actually had a better week than bitcoin, adding 2% over the past seven days compared to bitcoin’s half a percent dip.
DeFi tokens heat up
Is it a coincidence that some of the top performers among the top-100 set are decentralised finance (DeFi) projects?
Decentralised derivatives exchange Synthetix (SNX) added 30% overnight, while Maker (MKR) and Lido (LDO), the two biggest DeFi projects, added 27% and 18% respectively.
Total value locked across all DeFi protocols added over 7% to US$45.7bn overnight.
Perhaps with the ongoing centralised banking crisis, people are putting their trust in alternative forms of wealth management.
As long as they’re aware that the DeFi space is far from a risk-free alternative.
Global cryptocurrency market capitalisation currently stands at US$1.02tb, having added 7% overnight.
7.30am: HSBC buys Silicon Valley Bank’s UK business
HSBC Holdings PLC (LSE:HSBA) announced on Monday that its UK subsidiary, HSBC UK Bank, is acquiring Silicon Valley Bank UK for £1.
Reports over the weekend suggested there were a number of interested parties battling to buy the business which is the UK arm of stricken US bank Silicon Valley Bank which was closed by US regulators on Friday.
The FTSE 100 lender said that, as of 10 March 2023, SVB UK had loans of around £5.5bn and deposits of around £6.7bn. For the financial year ending 31 December 2022, SVB UK recorded a profit before tax of £88mln.
SVB UK’s tangible equity is expected to be around £1.4bn while a final calculation of the gain arising from the acquisition will be provided in due course, the bank added.
HSBC said the assets and liabilities of the parent companies of SVB UK are excluded from the transaction which will be funded from existing resources and completed immediately.
In a statement, Noel Quinn, HSBC Group CEO, commented “This acquisition makes excellent strategic sense for our business in the UK. It strengthens our commercial banking franchise and enhances our ability to serve innovative and fast-growing firms, including in the technology and life-science sectors, in the UK and internationally.”
Commenting on the deal, chancellor, Jeremy Hunt, said: “Today the government and the Bank of England have facilitated a private sale of Silicon Valley Bank UK; this ensures customer deposits are protected and can bank as normal, with no taxpayer support. I am pleased we have reached a resolution in such short order.
“HSBC is Europe’s largest bank, and SVB UK customers should feel reassured by the strength, safety and security that brings them.”