SVB Live Updates: Apollo Global among potential suitors for buying part of SVB loan book

As the Silicon Valley Bank collapse has forced the investors to cut their exposure to lenders, global financial stocks have lost around $464 billion in market value in two days.  

According to Bloomberg, the loss widened on Tuesday with the MSCI Asia Pacific Financials Index plumetting by 2.7% to the lowest since Nov. 29. Mitsubishi UFJ Financial Group Inc. slid as much as 8.3% in Japan, while South Korea’s Hana Financial Group Inc. fell 4.7% and Australia’s ANZ Group Holdings Ltd. lost 2.8%.

Market experts worry that the SVB-induced worry can impact the investments of financial firms in bonds and other instruments on the SVB-induced worry. Treasury yields plunged Monday amid expectations the Federal Reserve will hold off raising rates due to turmoil in the banking system.

As the SVB crisis continues to expand, oil prices fell more than $1 on Tuesday. The fall extended the previous day’s slide. The widening impact of SVB demise has sparked fears about a fresh financial crisis.

Brent crude futures were down 87 cents, or 1.1%, at $79.90 a barrel at 0345 GMT. U.S. West Texas Intermediate crude futures (WTI) dropped 85 cents, or 1.1%, to $73.93 a barrel, reported Reuters. A day ago, Brent price crashed to its lowest level since early days of 2023, while WTI tumbled to its lowest since December.

The unprecedented shutdown of SVB Financial triggered concerns about risks to other banks due to the US Federal Reserve’s share interest rate hike over the last year. It also forced the investors to wonder whether the US Fed might opt for a dovish stance in the coming time or not.

The Indian currency is expected to decline against the U.S. dollar on Tuesday, tracking losses in Asian equities and currencies as the ripple effect of Silicon Valley Bank collapse expand across the global market. Rupee fell 4 paise to 82.27 against US dollar in early trade on Tuesday.

The spillover impact of SVB demise was visible on most of Asian currencies which dropped between 0.2% to 0.4%. Shares in South Korea, Japan and Australia were all down about 2%.

Futures indicate that the Fed rate could peak at around 4.84% in May and cut rates from then on. The Fed policy rate is expected to be below 4% by December, marking a significant shift from the 5.64% peak prior to the collapse of SVB.

Private Equity giant, Apollo Global Management, is reportedly interested in buying a part of loans held by the Silicon Valley Bank. Apollo, one of the world’s largest alternative asset managers, is among other investors looking to buy pieces of Silicon Valley Bank, reported Bloomberg quoting sources.

Meanwhile, a report on axios.com said JPMorgan and PNC are among the potential suitors that may acquire SVB Financial Group. The deal would exclude the commercial bank that is currently under U.S. government control.

With hindsight, there were warning signs ahead of last week’s spectacular collapse of Silicon Valley Bank, missed not only by investors, but by bank regulators.

Just why the oversight failed remained a hot question among banking experts Monday, with some focusing on the weakness of US rules.

The Federal Reserve announced Monday plans for a “thorough, transparent and swift” review of the supervision of SVB that will be publicly released on May 1, effectively acknowledging that it could have done better.

President Joe Biden promised a “full accounting of what happened,” adding that he would ask regulators and banking regulators to tighten rules on the sector. {Read More}

After the worst bank collapse in the US in a decade, SVB Financial Group and two top executives were sued by investors and shareholders on Monday, reported Reuters. The two were accused of concealing how rising interest rates would leave its Silicon Valley Bank unit, which failed last week, “particularly susceptible” to a bank run.

The proposed action against SVB, Chief Executive Greg Becker and Chief Financial Officer Daniel Beck was filed in the federal court in San Jose, California. 

The filed case is the first in the series of likely lawasuites over the demise of Silicon Valley Bank. SVB had surprised the market two days earlier by disclosing a $1.8 billion after-tax loss from investment sales and that it planned to raise capital, as it scrambled to meet redemption requests.

The US Federal Reserve on Monday announced to launch an internal review of its supervision and regulation of Silicon Valley Bank after its collapse last week. The review will be release by May 1 and will be chaired by Vice Chair for Supervision Michael Barr. The collapse of the lender has sent global shockwaves in stock markets across the world. The bank was overseen by the San Francisco Fed and was the biggest bank failure in more than a decade.

“The events surrounding Silicon Valley Bank demand a thorough, transparent, and swift review by the Federal Reserve,” Fed Chair Jerome Powell said in a statement.

Newly Appointed CEO of Silicon Valley Bank, Tim Mayopoulos, said the company is open and conducting business as usual, reported Reuters citing a SVB Financial Group letter.

He also stated that the company’s business is normal within the US and is expected to resume cross-border transactions in coming days. He also added that all the depositors have full access to their money and new and existing deposits are also protected.

The recent events of bank collapse and their ripple effect in the market and economy has made clear that people can loose money even as being a depositor, said American Investor Bill Ackman in his tweet on Monday.

In his tweet, he also drew out the attention towards the two tier deposit system established in the USA to secure depositors’ money kept in banks.

“In a world with @Twitter – speed spread of information and smart-phone-enabled bank accounts where withdrawals can be made with the push of a button, no bank is safe from a run unless the depositor has an explicit gov’t guarantee that ensures that they always have complete access to the total value of their deposits,” said Bill in his tweet.

Amid rising fear in US banking crisis, Asia share markets continue to slid during early trade on Tuesday. The downfall was led by Japan’s financial stocks losses. The asian share market is tumbling as the US banking crisis gripped investors ahead of US inflation data release. The crisis widened with the fallout of Signature Bank. Investors continue to doubt the US government’s hastily formed rescue plan. 

Heavy selling hit U.S. regional bank stocks and traders raced headlong from bets on U.S. rate hikes, reckoning the Fed would now be thinking twice. reported Reuters.

Amid the falling US bank stocks, investors are questioning the efficacy of the US government’s hastily made rescue plan on weekend for the banking system to prevent more fallout from the collapse of SVB Financial Group’s Silicon Valley Bank.

US bank stocks slid, including those of San Francisco-based First Republic Bank, which tried to reassure investors with a statement about the strength of its liquidity. The company’s shares plunged a record 62% in New York. Among other regional banks, Phoenix-based Western Alliance Bancorp slumped 47%, and Beverly Hills, California-based PacWest Bancorp slid 21%, reported Bloomberg.

Major lenders also took a hit. Wells Fargo & Co. was down 7.1%, Citigroup Inc. slipped 7.5% and Bank of America Corp. declined 5.8%. The KBW Bank Index dropped 12%, the steepest decline since March 2020. (Bloomberg)

America’s biggest rooftop solar company, Sunrun Inc., said it can tap its cash at Silicon Valley Bank. It also informed of its good access to capital despite solar investors’ concerns about rising rates after the collapse of the startup lender. The company had access to the $80 million in deposits at the bank till yesterday. The company had $953 million in cash at the end of 2022.

“We have really good access to capital,” Chief Executive Officer of Sunrun Mary Powell said in an interview Monday at Bloomberg’s bureau in San Francisco. 

Oil held losses ahead of key inflation data as the biggest US bank collapse since 2008 continued to ripple through financial markets. West Texas Intermediate traded below $75 a barrel after closing 2.5% lower on Monday following a volatile session. Investors will be watching the consumer price index read due later Tuesday for clues on the path forward for monetary tightening, though bets are increasing the Federal Reserve won’t raise interest rates next week due to the fallout from the demise of Silicon Valley Bank. “Oil has been unable to escape the spill over from the collapse of SVB,” said Warren Patterson, head of commodities strategy for ING Groep NV. “There is still plenty of room for further volatility in the short term with US CPI data.” (Bloomberg)

Signature Bank’s collapse is another casualty in the ongoing banking turmoil. The company’s online payment network continues to be online even after the lender was put into receivership, reported Bloomberg. Signet, a blockchain-based system, has been a key piece of the infrastructure powering the 24/7 crypto market. The system, a competitor to Silvergate Capital Corp.’s now-defunct SEN, counted stablecoin issuer Circle, crypto exchange Coinbase and a range of crypto trading shops among its users. Signet used technology developed by Tassat, which builds private blockchains for banks. (Bloomberg)

One of the largest alternative asset managers, Apollo Global Management Inc has expressed interest in snapping up a book of loans held by collapsed Silicon Valley Bank. Apollo is considering to buy pieces of the bank, reported Reuters. The bank had $73.6 billion of loans as of Dec. 31, 2022, but the size of the loan book Apollo is interested in couldn’t be determined. Apollo declined to comment.

The Federal Deposit Insurance Corp. took over Silicon Valley Bank on Friday, after its long-established customer base of tech startups began withdrawing deposits en masse.

At the end of last year, the bank had more than $175 billion in mostly uninsured deposits and $209 billion in total assets. Many of those assets were long-term bonds the bank had to sell at a loss due to rising interest rates.

Federal Reserve Vice Chair Michael Barr will lead a review of the supervision and regulation of Silicon Valley Bank “in light of its failure,” the central bank announced Monday.

“The events surrounding Silicon Valley Bank demand a thorough, transparent, and swift review by the Federal Reserve,” said Fed Chair Jerome Powell, according to the statement. The review will be publicly released by May 1. (AFP)

Credit risk indicators flashed red on Monday, as investors worried about contagion risks across corporate debt markets after the collapse of Silicon Valley Bank (SVB) and New York’s Signature Bank in the space of 72 hours.

An index of credit default swaps (CDS) on U.S. investment-grade companies rose to 90.2 basis points, its highest since November, after U.S. action to guarantee deposits at tech-focused lender SVB failed to reassure investors that other banks remain financially sound.

The equivalent index for CDS on junk-rated companies fell in price to 98.8 on Monday, its lowest since November. In Europe, the cost of insuring exposure to European junk bonds on Monday posted its biggest jump in three months.

Rising CDS spreads signal investors are hedging bets on a deterioration in credit quality.

“Unfortunately these things tend to rarely be isolated,” said Jordan Kahn, president and chief investment officer at ACM Funds in Los Angeles.

“This is a really ugly credit event that’s happening and the Fed and the Treasury have come out to backstop it, but even if there is some relief period after this, (my concern is) that it will spread to other things,” he said. “There are other types of credit events that are likely to unfold.” (Reuters)

European stocks logged their steepest one-day fall this year on Monday on continued drag from banking stocks even as authorities stepped in to limit the fallout from the sudden collapse of Silicon Valley Bank. European banking stocks dropped 5.7%, notching their worst two-day selloff since the Russia-Ukraine war broke out early last year.

Britain has well capitalised banks, Prime Minister Rishi Sunak said on Monday, adding his voice to ministers and officials who say there is no concern about systemic risk following the collapse of Silicon Valley Bank.

“Our banks are well capitalised, the liquidity is strong,” Sunak told ITV during a visit to the United States, reported Reuters

“I think the Bank of England Governor was right and the Chancellor was right to address this and make it clear that actually our banks are well capitalised and they don’t have any concerns about systemic risk.”

Nasscom on Monday said the US administration’s stance on protecting depositors of Silicon Valley Bank that collapsed, is “reassuring” for Indian startups who have funds in that bank.

The announcement by Biden administration’s that depositors of Silicon Valley Bank (SVB) will have access to their money, has given hope, said Nasscom’s Senior Vice President and chief strategy officer Sangeeta Gupta reported PTI.

It will address the immediate financial issues that Indian startups were grappling with, she added.

First Republic Bank has been able to meet withdrawal demands on Monday with the help of additional funding from JPMorgan Chase & Co, the mid-cap lender’s Executive Chair Jim Herbert told CNBC.

The bank was not seeing massive outflow of deposits, Herbert said.

Exchanges just halted trading in several bank stocks due to volatility. The sector is once again selling off sharply in early trading Monday.

Currently halted stocks include – PacWest Bancorp, Zions Bancorporation, First Republic Bank, Regions Financial, reported WSJ

Euro zone supervisors see limited consequences for banks in the region from the collapse of two U.S. lenders, while stressing the need to watch any further spillover closely.

Investors were selling euro zone bank shares and reeling in their bets on interest rate increases by the European Central Bank after Silicon Valley Bank became the largest U.S. bank to fail since the global financial crisis of 2008, prompting U.S. authorities to step in.

But a senior European Central Bank supervisor said euro zone banks were well funded and more conservative than SVB, which mostly lent to tech startups, and New York-based rival Signature Bank, which was wound down at the weekend, reported Reuters.

The source said supervisors saw no direct implication of the SVB collapse for euro zone banks but cautioned this could change if the fallout in the United States extended to bigger banks, raising the risk of contagion.

US stock indexes were mixed in choppy trading on Monday as investors weighed a possible pause in interest rate hikes by the Federal Reserve in March and risks of a contagion from Silicon Valley Bank’s collapse.

Regulators over the weekend stepped in to restore investor confidence in the banking system, saying Silicon Valley Bank depositors will have access to their funds on Monday.

President Joe Biden said that the administration’s swift actions to help depositors in two U.S. banks should give Americans confidence that the banking system is safe.

Trading in shares of SVB’s peer Signature Bank, which was shut down by regulators on Sunday, was halted.

First Republic Bank dropped 76.6% as news of fresh financing failed to reassure investors, while Western Alliance Bancorp, PacWest Bancorp fell 82.5% and 53% respectively. Trading in the stocks was halted several times due to volatility.

Shares of big U.S. banks including JPMorgan Chase & Co , Morgan Stanley and Bank of America fell between 0.8% to 6%.

The KBW regional banking index fell 9.8%, while the S&P 500 banks index dropped 6.4%.

Dow Jones Industrial Average was up 28.10 points, or 0.09%, at 31,937.74, the S&P 500 was down 1.70 points, or 0.04%, at 3,859.89, and the Nasdaq Composite was up 26.58 points, or 0.24%, at 11,165.47.

Oil prices fell $2 in volatile trading on Monday as the collapse of Silicon Valley Bank hit equities markets and raised fears of a fresh financial crisis, but a recovery in Chinese demand provided support.
Brent crude futures were down $2.03, or 2.5%, to $80.75 per barrel by 1401 GMT. West Texas Intermediate U.S. crude futures (WTI) fell $2.11, or 2.8%, to $74.57 a barrel.

First Republic Bank’s shares plunged on Monday as news of fresh financing failed to assuage investor fears of contagion in the banking sector after SVB Financial Group’s downfall last week. The U.S. regional lender’s stock was last down 67% at $27.08 before its trading was halted for volatility.

The US government and financial authorities have acted decisively in response to the collapse of Silicon Valley Bank and Signature Bank , German Finance Minister Christian Lindner said on Monday.

US regulators were forced to step in with a series of emergency measures after the failure of the two banks, which threatened to trigger a broader crisis.

European and German financial institutions are monitoring the situation, Lindner said in Brussels on the sidelines of a Eurogroup meeting.

Prices for Treasurys shot higher on both demand for something safe and expectations for an easier Fed. That in turn sent their yields lower, and the yield on the 10-year Treasury plunged to 3.46% from 3.70% late Friday. That’s a major move for the bond market. It was above 4% earlier this month.

The two-year yield, which moves more on expectations for the Fed, had an even more breath-taking drop. It fell to 4.09% from 4.59% Friday.

The turmoil following the collapse of Silicon Valley Bank continued to spread Monday, with First Republic Bank shares falling about 60% in pre-market trading despite efforts by the US regional lender to reassure investors on its liquidity.

The declines came after the bank said in a statement late Sunday that it had more than $70 billion in unused liquidity to fund operations from agreements that included the Federal Reserve and JPMorgan Chase & Co.

“The additional borrowing capacity from the Federal Reserve, continued access to funding through the Federal Home Loan Bank, and ability to access additional financing through JPMorgan Chase & Co. increases, diversifies, and further strengthens First Republic’s existing liquidity profile,” the bank said.

Wall Street’s main indexes opened lower on Monday as bank stocks tumbled on fears of contagion following Silicon Valley Bank’s (SVB) collapse, while expectations rose for a pause in interest rate hikes in March.

The Dow was down 0.4% shortly after the market opened. Meanwhile, the S&P 500 and Nasdaq Composite lost 1.2% and 1.1%, respectively.

The UK government cleared the way for HSBC Holdings Plc to buy the British arm of Silicon Valley Bank by waiving certain restrictions on what types of customers could be taken on by its UK retail bank.

HSBC was given an exemption over rules that do not allow complicated corporate customers to be housed within ring-fenced banks, Andrew Griffith, the City Minister, said in a letter Monday to the Treasury Select Committee. He later told Bloomberg TV that neither the government nor the Bank of England gave HSBC any guarantees.

“The Government is using its powers under the Banking Act to provide HSBC with an exemption to certain ring-fencing requirements,” Griffith said in the letter to the committee’s chair, Harriet Baldwin.

Ring-fencing requires banking groups to separate their retail banking services from their investment and international banking activities. It was part of the government’s response to the global financial crisis in 2008 and was aimed at protecting UK retail banking from shocks emanating from elsewhere.

The concession was one of the terms of the deal thrashed out between the Treasury and HSBC overnight and announced just before markets opened. Its UK-based ring-fenced subsidiary is paying £1 to take on SVB’s business, the bank said.

Following the collapse of two major banks within days of each other, President Joe Biden insisted on Monday that Americans could still ‘have confidence’ that US banking was safe. The POTUS also said that he was ‘going to ask Congress and regulators to strengthen bank rules’. He reminded that the FDIC had already taken control of SVB and Signature Bank assets.

Amid growing fears of a global ripple effect, the President assured that no losses would be borne by US taxpayers. “Money will come from insurance fund fees,” he reportedly said.

“Investors in the banks will not be protected…no one is above the law,” he added. Read more

Gold raced towards the key $1,900 level on Monday, emboldened by bets that the Federal Reserve may have to tone down its rate hikes as investors sought cover from uncertainty triggered by the collapse of US lender Silicon Valley Bank.

Spot gold was up 1.6% at $1,897.31 per ounce, as of 1237 GMT, the highest price since early February. U.S. gold futures gained 1.7% to $1,898.10.

On Friday, gold climbed 2% after California regulators closed tech startup-focused Silicon Valley Bank. Regulators also shuttered New York-based Signature Bank on Sunday.

Bank stocks sagged and U.S. stock futures were mixed Monday ahead of the market’s open in New York, shaken by worries the biggest U.S. bank failure in nearly 15 years might have ripple effects around the world.

Futures for the Dow Jones industrials fell 0.7% before the bell, while futures for the S&P 500 were off 0.4% after being up earlier.

Wells Fargo fell 4.3% and Bank of America was off more than 5%.

The yield on the 2-year Treasury, which moves more on expectations for the Fed, tumbled further to 4.06% early Tuesday. It’s fallen a full point since last week, when it hovered around 15-year highs.

The US dollar fell on Monday on expectations the Federal Reserve will be less aggressive in raising interest rates after authorities stepped in to limit the fallout from the sudden collapse of Silicon Valley Bank.

The Fed announced it would make additional funding available through a new Bank Term Funding Program, which would offer loans of up to one year to depository institutions, backed by Treasuries and other assets these institutions hold.

The dollar index, which measures the US currency against six others, slipped as much as 0.55% to near one-month lows of 103.67 after Goldman Sachs said it no longer expects the Fed to deliver a rate hike at its March 22 meeting. The index was last at 104.12.

The market is now pricing a nearly 60% chance of the Fed sticking to its current rate and around a 40% chance of a 25 basis point hike. In contrast, the market was pricing a 70% chance of a 50 basis point hike before the SVB collapse.

Sterling rose against a weakening dollar on Monday after the sudden collapse of U.S. tech-focused lender Silicon Valley Bank (SVB) raised expectations that the Federal Reserve will slow down the pace of its interest rate hikes.

The U.S. government announced several emergency measures to shore up confidence in the banking system.

In Britain, HSBC bought the UK arm of SVB for a symbolic one pound on Monday. UK finance minister Jeremy Hunt said the rescue was necessary to help protect some of Britain’s most important technology companies.

The Bank of England said on Monday that Britain’s banking system was sound after the central bank helped to find a buyer for the British arm of SVB.

Sterling rose 0.4% to $1.2089, after briefly touching an almost two-week high against the dollar. It edged 0.1% higher against the euro to 88.31 pence.

Defunct startup-focused lender SVB Financial Group plans to explore strategic alternatives for the holding company and its SVB Capital and SVB Securities businesses, as well as its other assets and investments, it said on Monday.

The move comes after Californian regulators shuttered the bank following a failed share sale that drained $42 billion in deposits in a single day and sucked out liquidity at the company.

Its board has appointed a restructuring committee consisting of five independent directors, it said in a statement.

The European Commission is monitoring the situation after the collapse of tech lender Silicon Valley Bank which has a very limited presence in the European Union, a spokesperson for the EU executive said on Monday.

“We take note of the swift and decisive reaction by U.S. authorities. At EU level, there is a very limited presence of Silicon Valley Bank in the EU and we are in touch with the relevant competent authorities,” the Commission spokesperson said.

Investors snapped up havens of government debt and gold, and sold financial shares as the collapse of Silicon Valley Bank continued to reverberate through trading desks even as authorities moved to backstop the banking system.

First Republic Bank shares slumped 60% in premarket trading amid growing worries about the health of US regional banks. The declines came after the bank said it had more than $70 billion in unused liquidity from the Federal Reserve and other lenders, reported Bloomberg

In Europe, Commerzbank AG and Credit Suisse Group AG shed more than 10%. HSBC Holdings Plc fell more than 2% after buying the UK unit of SVB for £1.

Contracts on the S&P 500 initially rallied early on Monday as investors dialed back rate-hike bets, but gave up those gains as bank stocks resumed declines. Among major lenders, Wells Fargo & Co. was down 3.5%, Citigroup Inc. slipped 3.1% and Bank of America Corp. lost 6.7%. The Stoxx Europe 600 index tumbled more than 2%, the most since December, with a gauge of banking stocks retreating nearly 6%.

Investors sought the safety of bonds. Treasury two-year yields dropped as much as 43 basis points to 4.17%, heading for their steepest three-day decline since Black Monday of October 1987. The 10-year yield fell to a one-month low and the dollar extended a decline against major peers. The yield on two-year German debt plunged 35 basis points to 2.74%, putting them on course for the steepest two-day fall on record.

Bank shares in Europe and Asia plunged on Monday as the United States’ move to guarantee the deposits of the collapsed tech-focused lender Silicon Valley Bank failed to reassure investors that other banks remain finacially sound.

Europe’s STOXX bank index fell 4.3%, having shed 3.78% on Friday, leaving it on track for its biggest two-day fall since Russia invaded Ukraine in February 2022.

Commerzbank AG fell as much as 12%, Credit Suisse Group AG was down almost 11% as lenders across Britain, Italy and Spain also fell.

The U.S. Federal Deposit Insurance Corporation (FDIC) said on Monday it had transferred all deposits of the Silicon Valley Bank to a newly created bridge bank.

In a statement, the FDIC said all customers of SVB would automatically become customers of the bridge bank, which will hold “normal banking hours and activities, including online banking.” Read more.

The Federal Deposit Insurance Corporation on Monday named Tim Mayopoulos as the chief executive officer of Silicon Valley Bank, a subsidiary of the defunct SVB Financial Group.

Mayopoulos steps in after regulators shuttered the startup-focused lender on Friday after a run on its deposits that left it with a dearth of capital.

The regulator has also transferred all deposits — both insured and uninsured — and substantially all assets of the bank to a newly created bridge bank.