SVB Financial Group share trading was halted Friday (March 10) after a 68% premarket plunge.
This move followed a 60% drop in the share price Thursday after SVB — which is the parent company of Silicon Valley Bank — said it had a $1.8 billion after-tax loss on its sale of investments, The Wall Street Journal reported Friday.
The bank is also trying to raise $2.25 billion in capital by selling common and preferred stock, according to the report.
Some investors are concerned about SVB’s liquidity and have advised clients to withdraw their money from the bank, the report said.
As PYMNTS reported Friday, the company’s $1.8 billion loss was realized on its sale of $21 billion of U.S. Treasury holdings and securities. Its efforts to raise capital are meant to offset the loss on the asset sales.
“We are taking these actions because we expect continued higher interest rates, pressured public and private markets, and elevated cash burn levels from our clients as they invest in their businesses,” SVB said in a Wednesday update.
SVB’s sale of assets was driven by the outflow of deposits it has seen as depositors flee for higher rates.
Seeing this, investors became more concerned about other banks’ unrealized losses on securities and caused financial stocks to plunge on Thursday.
The top four U.S. banks lost a combined $52 billion of market capitalization on that day, with JPMorgan down $22 billion, Bank of America down $16 billion, Wells Fargo down by $10 billion and Citigroup down by $4 billion compared to the previous day.
Investors’ concerns that the outflow that has impacted SVB could affect other banks as well has continued to affect some financial institutions’ stocks Friday, while others have seen the impact soften after seeing their losses on Thursday, according to the Friday report in the WSJ.
Banks have seen a historic drop in deposits, with commercial bank deposits falling for the first time since 1948 as consumers move to higher-yield alternatives.
As a result, banks have begun to lift their own rates, especially on certificates of deposit (CDs), in an effort to woo back consumers.
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