SVB Financial Group files for bankruptcy
In the US, SVB Financial Group has filed for a court-supervised reorganisation under Chapter 11 bankruptcy protection to seek buyers for its assets, a week after its former division Silicon Valley Bank was taken over by US regulators.
The move comes after the company said on Monday that it planned to explore strategic alternatives for its businesses. SVB Securities and SVB Capital’s funds and general partner entities are not included in the Chapter 11 filing and the firm said it planned to push on with the process to evaluate alternatives for the businesses.
Banking shares fell more than 1.5% in pre-market trading. Regional banks were hardest hit, with PacWest Bancorp and First Republic plunging between 10% and 20%.
Credit Suisse shares are also sliding again and have fallen 12% to a daily low of 1.76 Swiss francs.
Key events
Closing summary
After a calm start to the day, with share gains in Asia and Europe, there was a renewed sell-off in banking shares in Europe and the US.
As fears of a wider banking crisis spread, European banking shares tumbled, with the Euro Stoxx banks index down 3.5%. ING and Commerzbank both lost 5%, BNP Paribas shed 4.2% and Deutsche Bank fell 3%. European stock markets slid between 1% and 1.7% as a result.
US banking shares also sold off, including Goldman Sachs, JPMorgan Chase and Morgan Stanley, with regional banks hardest hit.
The parent of Silicon Valley Bank, which was taken over by Californian regulators a week ago, today filed for a court-supervised reorganisation under Chapter 11 bankruptcy protection to seek buyers for its assets. SVB last Friday was the first domino to fall, followed by New York’s Signature Bank on Sunday.
Wall Street’s biggest lenders teamed up yesterday to rescue First Republic Bank after its shares crashed, pumping $30bn (£25bn) into it, but First Republic shares slumped 26% today.
In Europe, Credit Suisse has lurched from crisis to crisis, and the Swiss National Bank was forced to offer a £44.5bn lifeline to Switzerland’s second-biggest bank. Although there are specific problems at SVB and Credit Suisse, there is evidence of wider distress in the banking system. Credit Suisse shares have tumbled a further 10% today.
As clients withdraw their cash at a dizzying pace, net outflows from Credit Suisse’s US and European managed funds topped $450m between Monday and Wednesday, the data firm Morningstar Direct estimates.
Here’s an explainer on what’s going on in markets and whether there’s going to be another global crisis.
Our other main stories today:
Thank you for reading. Have a great weekend. Good-bye! – JK
Andrew Hunter, deputy chief economist at Capital Economics, has looked at the US industrial production data, out earlier today.
The February industrial production data were marginally stronger than we had expected, with manufacturing output rising by a further 0.1% following the earlier 1.3% month-on-month surge in January. But with the surveys going from bad to worse and given the risks from the turmoil in the banking sector, we suspect that further declines in manufacturing activity still lie in store…
Although the recent resurgence in manufacturing activity in China presents an upside risk to the near-term US manufacturing outlook, that boost could yet be offset by a loss of business confidence and tighter credit conditions. The latest domestic surveys, including the March Empire State and Philly Fed indices released this week, support the idea that renewed declines in manufacturing output are likely over the coming months.
Olivia Cross, assistant economist at Capital Economics, said
Some of the hit to confidence from turmoil in the banking sector will have been captured in the University of Michigan’s consumer sentiment provisional reading, which fell to 63.4 in March, from 67.0, but the majority of the impact won’t be felt until the final March reading or even the April survey.
Some of the impact from the turmoil in the banking sector will have been caught in the March preliminary survey, which ran until Wednesday 15th March. The press release noted that 85% of responses were already in, however, with the decline in sentiment clear even before the collapse of Silicon Valley Bank. The final survey release will probably be much weaker, and we may not see the full hit to confidence until the April survey. The decline in sentiment in March was probably instead driven by the renewed fall in the stock market earlier in the month.
While we don’t put too much weight on the relationship, the latest reading suggests that the strength of consumption earlier this year is likely to fade. Even if consumer sentiment doesn’t take a big hit, we are still concerned about a tightening in bank lending standards, which could weigh on the wider economy.
Consumer sentiment weakens before banking turmoil
The University of Michigan’s closely-watched consumer sentiment index has fallen to 63.4 in March from 67 last month. This is weaker than expected, and shows confidence was declining even before the banking turmoil.
The dollar measured against a basket of major currencies has dropped on the news, by 0.3%.
Wall Street falls, dragged down by banks
Wall Street stocks have fallen, dragged down by banks. The S&P 500 financial sector index has lost 2.2% while the KBW regional banking index has tumbled 3.8%.
The Dow Jones has shed 254 points to 31,992, a 0.8% drop while the S&P 500 is down nearly 20 points, or 0.5%, at 3,942, and the Nasdaq is flat at 11,709.
Among big US banks, Goldman Sachs is down 1.9%, Citigroup has lost 2.4% and Wells Fargo is 2.7% lower as fears of a full-blown banking crisis intensified, after SVB’s parent filed for bankruptcy.
Shares in First Republic tumbled nearly 21% in early trading, despite yesterday’s $30bn lifeline from major banks including JPMorgan Chase, whose shares have fallen 2.8% so far today, and Morgan Stanley (shares down 1.7%).
Over here, the FTSE 100 in London is trading 56 points, or 0.8%, lower at 7,353 while Germany’s Dax has lost nearly 200 points, or 1.3%, and the French market is down more than 100 points, or 1.45%. The Italian borsa has slid 335 points, or 1.3%.
Credit Suisse shares are now trading 9% lower at 1.83 Swiss francs, after falling to 1.76 earlier. The Euro Stoxx Bank index has slid 2.2%.
Credit Suisse outflows top $450m
As clients withdraw their cash at a dizzying pace, net outflows from Credit Suisse’s US and European managed funds topped $450m between Monday and Wednesday, the data firm Morningstar Direct has calculated.
The Swiss bank manages more than 300 European funds.
Jes Staley, the former boss of Barclays, will face a two-day deposition next week over allegations he knew about Jeffrey Epstein’s sex trafficking operation.
JP Morgan, the US bank where Staley worked and had the convicted sex offender as a client, said it would depose him next Thursday and Friday as part of its lawsuit alleging he concealed crucial information about the late financier.
It has accused Staley of “intentional and outrageous conduct” in concealing key information and called for the former Barclays chief executive to be made liable for penalties the US bank may face as a result of two separate lawsuits accusing it of facilitating Epstein’s trafficking of women and girls by failing to spot red flags.
SFO confiscates $7.7m from ex-Petrobras employee
In other news, the Serious Fraud Office has confiscated more than $7m from an ex-Petrobras employee, illicit cash that is related to a massive Brazilian corruption scandal involving the state-run oil company Petrobras. The SFO said:
Today, the SFO recovered over $7,699,204 from convicted money launderer, Mario Ildeu de Miranda, after its investigation revealed he had channelled criminal proceeds through multiple international bank accounts using several different company names.
This is the largest ever amount seized by the SFO from a single bank account.
Mr Miranda, 71, was convicted of 37 counts of money laundering in Brazil in 2019 as part of ‘Operation Car Wash’, in which Brazilian authorities uncovered extensive and systemic bribery centred around state-owned oil company Petrobras. Mr Miranda, a former executive at Petrobras, was sentenced to over six years in prison and ordered to pay $24,750,000 in Brazil.
In August 2020, the SFO froze a UK bank account that contained over $7,699,204 following a report that these funds were linked to Mr Miranda.
The SFO’s investigation subsequently uncovered that these funds had been transferred out of Mr Miranda’s main Swiss bank account and channelled through other banks in Switzerland, Malta, Portugal, the UAE and the Bahamas before being deposited in London – where the SFO froze the account.
The investigation also exposed how Mr Miranda spent suspected proceeds of crime to fund his extravagant lifestyle. This included over $1m on hotels and casinos in Las Vegas, as well as $95,000 on a new luxury car.
You can read more on the SFO’s website.
SVB Financial Group files for bankruptcy
In the US, SVB Financial Group has filed for a court-supervised reorganisation under Chapter 11 bankruptcy protection to seek buyers for its assets, a week after its former division Silicon Valley Bank was taken over by US regulators.
The move comes after the company said on Monday that it planned to explore strategic alternatives for its businesses. SVB Securities and SVB Capital’s funds and general partner entities are not included in the Chapter 11 filing and the firm said it planned to push on with the process to evaluate alternatives for the businesses.
Banking shares fell more than 1.5% in pre-market trading. Regional banks were hardest hit, with PacWest Bancorp and First Republic plunging between 10% and 20%.
Credit Suisse shares are also sliding again and have fallen 12% to a daily low of 1.76 Swiss francs.
Shares in the UK subprime lender Non-Standard Finance crashed 22% to 0.35p after it set out plans to recapitalise itself by raising £95m through a share sale that would wipe out existing shareholders.
Its top shareholder is the British private equity firm Alchemy Special Opportunities with a 29.9% stake.
The stock has lost nearly all of its value since hitting an all-time high of 108p in 2015.
Chief executive Jono Gillespie defended the business rescue proposal.
Whilst this is, in a sense, only the end of the beginning, and significant additional work lies ahead over the coming months, the launch of the scheme is the first key step.
The business, which provides loans to people who are turned down by mainstream banks, plans to compensate customers to the tune of £14m.
European stocks have turned negative while the FTSE 100 in London is flat at 7,415. The European banking index slipped 0.4%, giving up earlier gains of 2.2%.
Here in London, HSBC shares have fallen 1.2% while Lloyds Banking Group has lost nearly 1% and Barclays is down 0.7%.
US stock futures are also in the red, pointing to a lower open on Wall Street later.
ECB holds unscheduled supervisory board meeting
The European Central Bank held an unscheduled meeting of its supervisory board this morning to discuss stress and vulnerabilities in the eurozone banking sector after the recent selloff in bank shares, a spokesperson said.
The supervisory board, which directly oversees 111 lenders in the eurozone, normally meets every three weeks but held two impromptu meetings this week because of the market turmoil. The spokesperson told Reuters:
The supervisory board is meeting to exchange views and to provide members with an update on recent developments in the banking sector.
Reuters reported, citing a source, that the purpose of the meeting was to monitor liquidity in the eurozone banking sector and watch for any vulnerability to a run on any bank, but the source did not expect the ECB to take any immediate action.
Bank stocks tumbled over the past week, spooked first by the collapse of Silicon Valley Bank and two other US bank failures. Then came the 30% selloff in Credit Suisse on Wednesday, which ended yesterday after the Swiss National Bank provided a 50 billion Swiss franc lifeline. After a 19% recovery yesterday, Credit Suisse shares are sliding again this morning.
Shares in the embattled Swiss bank are now down nearly 9%, and fell as low as 1.83 Swiss francs.
