Investors pushed the market value of the big four U.S. banks $52.4 billion in assets on Thursday amid a broader selloff in financial stocks that analysts have linked to investor concerns over the value of lenders’ bond portfolios. rice field.
JPMorgan Chase, Bank of America, Citigroup and Wells Fargo sell Difficulties for Silicon Valley Banksa technology-focused smaller lender.
Late Wednesday, the SVB revealed it lost about $1.8 billion after selling a portfolio of securities worth $21 billion. The loss prompted the bank to announce a stock sale to strengthen its capital base.
The massive losses from the sale of SVB Securities have turned investors’ attention to the risks that may be lurking in the huge bond portfolios held by other brokerages. US bankmany of which invested deposit inflows in long-term securities such as US Treasuries amid the coronavirus pandemic.
The value of these holdings has fallen sharply over the past year as interest rates have risen sharply.
The KBW Banks Index fell more than 7%, its steepest drop since June 2020, when investors sold bank stocks out of fear of a financial shock early in the Covid-19 pandemic.
San Francisco-based First Republic Bank, a bank for wealthy customers and a member of the Banking Index, fell more than 16%.
Wells Fargo analyst Mike Mayo described the plunge as the banking industry’s “SIVB moment,” referring to the SVB ticker on the Nasdaq. He said weakness in tech-focused lenders didn’t indicate a sector-wide problem, but it was still affecting investor sentiment.
Thursday’s sell-off comes days after data from the Federal Deposit Insurance Corporation, the banking regulator, showed U.S. lenders had unrealized losses totaling about $620 billion in securities portfolios.
This is well below the industry-wide assets of $2.2 trillion at the end of 2022. Total realized losses last year were $31 billion.
But as the Federal Reserve continues to hike rates, savers want higher yields, so rising losses on paper coincide with falling bank deposits.
The worst-case scenario for banks is that they may have to comply with SVB by selling some of their securities at a loss to cover their withdrawal of deposits.
Christopher Whalen of Whalen Global Advisors said the SVB’s move has drawn attention to the issue of bond portfolios and unrealized losses. But even if banks had to recognize losses, it wouldn’t affect the solvency of most lenders, he added.
“Banks with large balance books have had the most trouble. They have fallen asleep. No one expected this inflation to continue,” he said.
“Today interest rates are not going to go up. We see losses and we mark the market.”
https://www.ft.com/content/47e3d4a7-70b6-4a4e-98b0-6322f8e8ba53 Investors Sell U.S. Bank Stocks Amid Concerns Over Bond Portfolio Value