Relief after SVB takeover
Bank stocks pull the Dow higher
03/27/2023, 11:01 p.m
Confidence in the banking industry is returning on Wall Street. After the announced takeover of the collapsed Silicon Valley Bank, not only the buyer’s papers are in high demand. Bonds and gold are in less demand as investors become more risk-averse.
US bank First Citizens BancShares’ takeover of deposits and loans from the ailing Silicon Valley Bank (SVB) has eased fears of more bank failures on Wall Street. The Dow Jones Index the standard values closed 0.6 percent higher on Monday at 32,432 points. The tech-heavy one Nasdaq on the other hand, fell 0.5 percent to 11,768 points. The broad one S&P 500 increased 0.2 percent to 3977 points.
US investors grabbed bank stocks in particular at the beginning of the week. “There is relief that First Citizen Bank, one of America’s largest family-controlled banks, has come to the rescue,” said finance expert Susannah Streeter of wealth manager Hargreaves Lansdown. “Some calm has returned to the banking sector, but hopes that this move will lead to significant stabilization may be short-lived.”
“The SVB has been the victim of too rapid growth and an unwise investment of too much of its deposits in longer-dated government bonds,” said Stuart Cole, chief economist at Equiti Capital. “The takeover brought reassurance that SVB was fundamentally healthy despite this big mistake.” The 17 branches of the California money house, which specializes in financing young technology companies, were to open as First Citizens on Monday. The SVB bankruptcy had fueled fears of further collapses in the banking industry worldwide.
The titles of the SVB buyer First Citizens shot up by around 54 percent. Also the share certificates First Republic Bank rose nearly 12 percent. A report that the US authorities are considering more support for banks also contributed to this. That could give the struggling regional lender more time to shore up its balance sheet. The regional banks Western Alliance and PacWest each rose by more than three percent.
The big US banks were also in demand: the titles of JPMorgan, Citigroup and Bank of America climbed between 2.9 and five percent. Previously, European bank stocks were up around 1.5 percent after the sector fell nearly 4 percent on Friday amid concerns over Deutsche Bank.
Silvergate is rising against the trend
Meanwhile, the burgeoning optimism in the banking sector continued bonds to. Conversely, 10-year US Treasury yields rose to as much as 3.517 percent. Also from the “safe haven” gold investors withdrew. The precious metal fell by around one percent to $1,955 per troy ounce (31.1 grams).
The cyber motto Bitcoin meanwhile, retreated from a previously reached nine-month high and fell about four percent to $ 26,533. This also dragged down the stocks of cryptocurrency and blockchain-related companies. This is how the crypto exchange became cheaper Coinbase by around eight percent, blockchain farm operators bitfarms by 2.5 percent. Among other things, the mood was depressed by the fact that the large cryptocurrency exchange Binance and its boss Changpeng Zhou have been sued by the CFTC for regulatory violations.
The shares of the battered crypto bank, on the other hand, went against the trend Silvergate by 14.5 percent. The lender said it had agreed to prepay a $205 million secured loan related to the winding down of the business. Already on Friday, the title had risen by around 50 percent to $1.72. The stock has still lost more than 80 percent of its value this month as the crypto bank plans its voluntary liquidation due to impending insolvency after heavy losses.