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The SVB Impact on financial stocks
In Brief: Global Financial Market dropped $465 billion in three days.
As a result of Silicon Valley Bank’s collapse, Bloomberg reports that the combined market capitalisation of the MSCI World Financials Index and the MSCI EM Financials Index has dropped $465 billion in three days, as investors reduced exposure to lenders from New York to Japan before the turmoil began.
SVB’s collapse prompted investors to question whether a government rescue plan for the banking system will prevent further consequences.
The impact on global financial stocks.
It appears that losses widened early Tuesday, with the MSCI Asia Pacific Financials Index falling as much as 2.7 percent to its lowest level since November 29. Japan’s Mitsubishi UFJ Financial Group Inc fell as much as 8.3 percent, while South Korea’s Hana Financial Group Inc dropped 4.7 percent, and Australia’s ANZ Group Holdings Ltd fell 2.8 percent, according to data collected by Bloomberg.
As of market close 3/13
Effects on other financial instruments.
According to FactSet data on Monday, March 13, 2023, 24 of S&P’s 25 worst performers were financial stocks. A nearly 10% rally in the S&P 500 was wiped out by the bank losses, briefly turning the index negative year-to-date.
Bond yield, especially in Treasury bonds, will be negatively impacted by SVB collapse and Signature Bank closure.
This collapse of SVB comes after the bank invested heavily in US government bonds two years ago when it had healthy deposit levels concentrated in the telecoms and venture capital sectors, as well as among investors in venture capital funds. In response to the Fed raising interest rates, the U.S. government bond prices declined. A pressured tech sector also increased demands for cash returns to depositors.
Nevertheless, this crisis is restricted to the U.S. bond market alone, so this will have little impact on other treasuries regulated by representative Reserve Banks.
There is a concern, however, that mutual fund investors, and all investment funds locally or globally, including hybrid funds and international equity funds, will be affected by the recent collapse of SVB and Signature Bank, since they are currently investing in international funds and international equity funds.
Those who have positions in USD on the forex market may have to take a beating as the US dollar has retracted from the highs it reached three months ago by a greater extent in the last three days than it did previously. In terms of the Dollar Index, it is currently trading at $103.89, which was quoting close to $106 levels on Thursday.
It is still likely that the most significant impact of the US banking crisis will be on the IPO market and the US equity market. This will negatively impact startups planning to list until the real picture emerges.
Should you Buy the Dip in Bank Stocks now?
‘High liquidity is key’: says Vivek Juneja , JPMorgan Analyst
These big bank stocks have enough liquidity to more than cover severe funding outflows
US Bancorp (USB)
As the parent company of US Bank, this Minneapolis-based bank holding company is the nation’s 5th largest bank by assets, with over 3,100 brick-and-mortar locations and over 4,800 ATMs.
Over the last three days, USB shares currently traded at $36.54, have dropped 20%, as it like most Wall Street bank stocks.
Bank of America Corporation (BAC)
The Bank of America’s market capitalization is $228 billion, and its total assets are $3.05 trillion, which makes it one of the largest banks in the world, and its second largest bank in the US. Approximately 10% of the deposits in US banks are held by Bank of America.
Shares of the company are currently trading at $28.51. Last Friday, they were trading at $30.98. Unlike the rest, BAC share only slipped 7.97% .
Also worth mentioning is Charles Schwab (SCHW)
Founded in 1832, Charles Schwab is the country’s largest publicly traded investment service provider, and as of the end of 2022, the company’s client assets topped $7.05 trillion. There are approximately 34 million brokerage accounts in the firm, commensurate with the company’s reputation as a provider of stock investment products to the masses of retail investors. Schwab provides clients with a full range of banking and investment services as well as investment management.
The company share is currently traded at $51.91. It was traded at $71,.14 the last friday, with a total of 27.03% slumped.
Nevertheless, it’s a dip that might be a good time to buy.
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