Following the collapse of tech-focused US banks such as Silicon Valley Bank, Signature Bank, and Silvergate Capital Corp;
Murthy Grandhi, Analyst at GlobalData, a leading data and analytics company, offers his view: “Over the last week, the US banking stocks plummeted following the crisis engulfing Silicon Valley Bank. Collectively, the US banks lost over $267 billion in the week ending 10 March. There were 10 banking companies whose weekly share prices plunged by more than 20%. Other than the Silicon Valley Bank with 62.5%, Silvergate Capital Corp (53.4%), and Signature Bank (36.9%), the other seven banking companies are PacWest Bank Corp (54.9%), Western Alliance Bancorporation (34.5%), First Republic Bank (33%), Customers Bancorp Inc (23.4%), Charles Schwab Corp (23.4%), First Foundation Inc (21.3%), and Metropolitan Bank Holding Corp (21%).
“In addition to concerns over the prevailing macroeconomic conditions, the ripple effect of the SVB Financial Group meltdown that created the assumption that other similar banks and lenders would also in financial trouble of undercapitalization resulted in a runaway selling.
“Regional banks, PacWest Bank Corp and First Republic Bank, which had exposure to venture capital market customers, witnessed a drop in market capitalization of more than 38% and 15% in a single trading session (March 10), respectively. First Republic Bank did release a financial update to alleviate concerns over the spread of financial risk by indicating that only 4% of its deposits are related to technology sector and that no single sector accounts for more than 9% of its total deposits, demonstrating a diversified portfolio.
“Other major regional bank, Western Alliance Bancorporation also issued a similar statement stating its total technology-related deposits stood at $6.5 bn with total deposits being $53.6 bn as of December 31, 2022.
“Charles Schwab, a major player in the financial services industry, experienced a sharp decline of 11.7% in its stock price in response to reports that institutional investors sold 8.5 million shares in a block trade.
“Very few banking stocks did well on otherwise a tough week for the US banking sector. The average weekly share price of CoastalSouth Bancshares Inc rose over by 9.2%, followed by AB&T Financial Corp with 4.4%.”
