Financial stocks take a hit as Silicon Valley Bank shares plummet
Shares in Silicon Valley Bank (SVB) dropped sharply on Thursday as investors moved to withdraw their deposits.
The drop came after the bank – a key lender to tech start-ups – announced a $1.75bn (£1.5bn) share sale to help bolster its finances.
Shares in banks around the world have fallen, with the four largest US banks losing more than $50bn in market value.
On Friday, shares in Asian banks were also trading lower.
Shares in SVB saw their biggest one-day drop on record after plummeting by more than 60% and lost another 0% in after-hours trade.
The firm launched the share sale after losing around $1.8bn when it offloaded a portfolio of assets, mainly US Treasuries.
Some start-ups who have money deposited in the bank, have been advised to withdraw their funds.
The bank is a crucial lender for technology start-ups, having been the banking partner for nearly half of US venture-backed technology and healthcare companies that listed on stock markets last year.
Value of bonds
In the wider market, there are concerns about the value of bonds held by banks as rising interest rates made those bonds less valuable.
Central banks such as the Bank of England and the US Federal Reserve have sharply increased interest rates as they try to curb inflation.
Banks tend to hold large portfolios of bonds and as a result, are sitting on significant potential losses. The falls in the value of bonds held by banks is not necessarily a problem unless they are forced to sell them.
But, if like Silicon Valley Bank, lenders have to sell the bonds they hold at a loss it could have an impact on their profits.
“The banks are casualties of the hike in interest rates,” Ray Wang, founder and chief executive of Silicon Valley-based consultancy Constellation Research told the BBC.
“Nobody at Silicon Valley Bank and in a lot of places thought that these interest rate hikes would have lasted this long. And I think that’s really what happened. They bet wrong,” he added.