Why Shares of SVB Financial Crashed Today
Shares of SVB Financial (NASDAQ: SIVB), the parent company of Silicon Valley Bank, tanked by more than 39% as of 10:45 a.m. ET today after the bank announced it was selling bonds for a loss and raising capital.
SVB caters heavily to the start-up and tech industries. As liquidity funneled into the banking system during the early part of the pandemic and tech and growth valuations took off, deposits at SVB surged, ballooning SVB's balance sheet and leading management to invest excess deposits into bonds to boost profitability.
However, after the Federal Reserve aggressively hiked interest rates and began pulling liquidity out of the economy through quantitative tightening, tech valuations have come down, and VC activity has slowed. Meanwhile, start-ups and early-stage companies that SVB banks with have been burning cash at a high clip, resulting in large deposit outflows. Between the end of the second quarter of 2022 and the end of the year, SVB saw noninterest-bearing deposits, which it pays no interest on, fall by close to $34 billion.
Source Fool.com
