The KBW Nasdaq Bank Index, which tracks 24 U.S. stocks including Citigroup Inc., JPMorgan Chase & Co. and Bank of America Corp., fell 7.7 per cent on Thursday, wiping out US$52-billion of value among the four largest banks and marking the index’s most severe one-day decline in nearly three years.The scary part here for Canadian investors is that their beloved Big Six bank stocks, hugely profitable and widely held for their rich dividends, were caught in the selloff.
The fear is that the drama will emanate to other lenders, the way that Bear Stearns’ failure in 2008 exacerbated the U.S. subprime mortgage crisis, kneecapped lenders worldwide and delivered a full-blown financial crisis. Bank of America analysts said that big banks remained safe bets because of their large cash reserves, diversified revenue streams and strong credit profiles.
Still, the lender’s difficulties this week highlight the concern that rising interest rates are not only weighing on economic activity. Higher rates might also be exposing problems in areas that had looked healthy. Consider that, as recently as Tuesday, SVB’s share price was up 16 per cent in 2023 .
SVB was holding a high number of Treasury and other government bonds — amounting to more than half of its assets Dare ask the regulators: How much capital/equity/skin-in-the game did SVB's shareholders need to hold against that?
Stopped reading the story when you quoted the Laundromat (JP Morgan) analyst.
If Globe and Mail says “a bigger financial crisis seems unlikely” then I know they’re definitely going to be right about that.
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