Short sellers are betting SVB\u0027s shares, which have lost 50% of their value since the start of 2022, will fall further. Read more.
But SVB’s core business is centred on banking deposits of cash raised by tech startups, and lending to the venture capital and private equity firms that back them. At the peak of the tech investing boom in 2021, customer deposits surged from US$102 billion to US$189 billion, leaving the bank awash in “excess liquidity.”
SVB can borrow against the value of its bond portfolio to raise liquidity if required: Becker said it had borrowed US$13.5 billion this way in the first nine months of 2022. However, SVB’s relative exposure far exceeds its peers. It had US$120 billion of investment securities — which include its US$91 billion mortgage-backed securities portfolio — at the end of 2022, far exceeding its US$74 billion total loans.Photo by Carlo Allegri/Reuters files
“Interest rates had been so low for so long that lots of people thought they’d be low forever,” said one equity analyst. SVB “made a bigger than average bet on that.”This advertisement has not loaded yet, but your article continues below.The bank is committed to holding its US$91 billion portfolio of bonds to maturity, an important accounting designation that shielded its profits from turmoil in financial markets last year, as long-term bond yields rose sharply above the 1.
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Silicon Valley Bank profit squeeze in tech downturn attracts short sellersShort sellers are betting SVB\u0027s shares, which have lost 50% of their value since the start of 2022, will fall further. Read more.
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