INSTANT VIEW 2-SVB meltdown triggers gyrations in global bank shares

We believe the sell-off was overdone as large banks have a lot more liquidity than smaller banks, they are more diversified with broader business models, have a lot of capital, are much better managed in regards to risk, and have a lot of oversight from regulators...

California banking regulators on Friday closed SVB Financial Group, putting the tech-heavy lender into receivership and will dispose of its assets to protect depositors as a crisis rippled through global markets and hit banking stocks. The regulator appointed the Federal Deposit Insurance Corporation (FDIC)as receiver, according to a statement.The failure of troubled tech-lender SVB Financial Group's efforts to raise capital through a stock sale rippled through global markets on Friday and sent shares of many banks tumbling although some larger U.S. banks recovered in morning trade.

Shares of SVB, which did business as Silicon Valley Bank, were halted on Friday after tumbling as much as 66% earlier in premarket trading. The rout, which began on Thursday, spread concern about hidden risks in the banking sector and its vulnerability to the rising cost of money. The S&P 500 banks index steadied from an early fall on Friday, briefly turning higher, after a 6.6% decline on Thursday, while the KBW Regional Banking index was down 2.8%. Europe's STOXX banking index fell almost 3.8%, marking it biggest one-day percentage slide since June 2022.

COMMENTS: JAKE DOLLARHIDE, CHIEF EXECUTIVE OFFICER, LONGBOW ASSET MANAGEMENT, TULSA, OKLAHOMA "We were all fed the theory that higher interest rates are going to be great for banks. Now we have higher interest rates and banks are the worst-performing group."

"There are obvious cracks in the system, and the worry is if the Fed raises rates (50 basis points) in two weeks, will that break something in the banking system. That's why the banks are selling off and the market is nervous." "Also, is there contagion? Is it going to come into the Midwest and the East Coast?" DAVID TRAINER, CEO, NEW CONSTRUCTS, INVESTMENT RESEARCH FIRM

"SVB's issues show that companies, including banks, need to be much more discerning about whom they do business with. The market has been punishing companies that have no business models since the bear market began in January 2022 and SVB's woes are the latest frontier in the market's reckoning. The market is tired of companies that do business with unprofitable companies or that are unprofitable themselves." "We do not believe there is contagion risk for the rest of the banking sector on the heels of SVB's struggles. The deposit base from the major banks is much more diversified than SVB and the big banks are in good financial health." R. SCOTT SIEFERS, MANAGING DIRECTOR, PIPER SANDLER

"This week's events increased our fears that it will be tough for this space to find sustained higher ground until some of the myriad uncertainties crystallize. And while this week's stock price action may have seemed shocking, the reality is that some of the related issues could certainly take a while to resolve. For instance, while funding pressures seem to be moving very quickly, history suggests they are unlikely to abate until well after the Fed has completed its tightening." VIVEK JUNEJA, ANDREW DIETRICH, SAI NETTEM, ANALYSTS, J.P.MORGAN "Large bank stocks sold off sharply yesterday following events among a couple of smaller banks. We believe the sell-off was overdone as large banks have a lot more liquidity than smaller banks, they are more diversified with broader business models, have a lot of capital, are much better managed in regards to risk, and have a lot of oversight from regulators... We don't expect a fire sale of securities from our banks, unlike at some smaller banks due to their liquidity positions and large, diversified deposit funding." EBRAHIM H. POONAWALA, ANALYST, BOFA SECURITIES, NEW YORK

"We believe that the sharp sell-off in bank stocks yesterday was likely overdone as investors extrapolated idiosyncratic issues at individual banks to the broader banking sector. However, the sell-off also highlights a (belated) realization among investors that higher for longer interest rates are negative for the sector's earnings per share outlook. While bank stocks could bounce in the short term on macro data that soothes inflation concerns, we believe that the group will struggle to shed the late cycle mindset that has taken hold among investors since last year. We remain biased towards maintaining exposure to the sector via mega-cap banks." ERIKA NAJARIAN, BANK ANALYST, UBS SECURITIES, NEW YORK "The sector's knee-jerk reaction is understandable, but likely overdone. While the lion's share of investors appreciated the uniqueness of SIVB's situation, investor concerns over deposit outflow and mix shift are still heightened . If investors are concerned about deposit flow, why punish the stocks who have sticky, operational retail checking deposits?

"In the era where funding and liquidity is a top concern, we think the money centers, especially JPMorgan Chase & Co would be the best place to 'hide.' And Bank of America's more than 6% decline in the stock feels too much for the institution that has one of the best and stickiest retail deposit bases in banking. Wells Fargo's funding should have the least amount of 'surge' given its asset cap. And US Bancorp's 7% decline is befuddling, given a very conservatively managed balance sheet." (Writing By John O'Donnell, Noor Zainab Hussain and Paritosh Bansal; Additional reporting by Niket Nishant, Jo Mason, Marc Jones, Iain Withers and Yoruk Bahceli; Editing by Toby Chopra)