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SVB in talks to sell itself after attempts to raise capital fail

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Re: SVB in talks to sell itself after attempts to raise capital fail

#31

Post by finfrastrcuture »

crisdux wrote: post #24
jpmattia wrote: post #11

I don't understand the incentive for a bank to buy them at this point, because any potential buyer might as well wait until the FDIC steps in to resolve the bank. Any banking wizards at HN who can explain the dynamics? edit: At the very least, FDIC should issue a statement guaranteeing beyond the $250K/depositor limit sooner rather than later in order to stem some of the outflow.

I'm spitballing here but it could be an opportunity for another bank to expand into a new market and acquire new customers. SVB has a unique position in the market, as they specialize in catering to the financial needs of industries such as technology, life science, healthcare, private equity, and venture capital.

Spot on, a ton of Directors / MDs are rushing to push this in front of their leadership (whoever 'leads' the acquisition will no doubt burnish their personal brand / career path /s).

That said, if I'm an SVB customer...do I want to stick with the bank that's had this issue? Even so, would I want to bank with the acquirer?

Re: SVB in talks to sell itself after attempts to raise capital fail

#32

Post by endisneigh »

dmix wrote: post #17
rickreynoldssf wrote: post #13

I'm feeling like this is early days of a disaster in Silicon Valley. We're at the first or second domino teetering right now. I hope a Sequoia or KPB will step up and save the bank, otherwise a lot of their portfolio investments are about to start missing payrolls.

I can't count how many times I've read similar comments on HN in the last 10yrs

most of the last 10 years had near 0% interest rate

Re: SVB in talks to sell itself after attempts to raise capital fail

#33

Post by alex_young »

niij wrote: post #21
jpmattia wrote: post #11

I don't understand the incentive for a bank to buy them at this point, because any potential buyer might as well wait until the FDIC steps in to resolve the bank. Any banking wizards at HN who can explain the dynamics? edit: At the very least, FDIC should issue a statement guaranteeing beyond the $250K/depositor limit sooner rather than later in order to stem some of the outflow.

> FDIC should issue a statement guaranteeing beyond the $250K/depositor limit sooner rather than later in order to stem some of the outflow. is there precedent for that?

The current limit is the result of such action in 2008: https://archive.fdic.gov/view/fdic/3388

Re: SVB in talks to sell itself after attempts to raise capital fail

#34

Post by ejb999 »

cbayram wrote: post #22
dmix wrote: post #17

Earlier quoted context omitted.

I can't count how many times I've read similar comments on HN in the last 10yrs

Rising interest rates is what’s different this time around

rising interest rates, and an economy that is beginning to falter.

Re: SVB in talks to sell itself after attempts to raise capital fail

#35

Post by jpmattia »

niij wrote: post #21
jpmattia wrote: post #11

I don't understand the incentive for a bank to buy them at this point, because any potential buyer might as well wait until the FDIC steps in to resolve the bank. Any banking wizards at HN who can explain the dynamics? edit: At the very least, FDIC should issue a statement guaranteeing beyond the $250K/depositor limit sooner rather than later in order to stem some of the outflow.

> FDIC should issue a statement guaranteeing beyond the $250K/depositor limit sooner rather than later in order to stem some of the outflow. is there precedent for that?

> is there precedent for that?

Again, it would be better to have a comment from someone who banks for a living, but back in 2008 when the FDIC limit was $100K, ISTR Sheila Bair making a statement to that effect (IndyMac?). One large issue was that companies would regularly be above the limit in order to run their payrolls, and so got caught in a bad position. That started companies with other banks worrying about where they were parking money, contributing to a systemic issue.

Re: SVB in talks to sell itself after attempts to raise capital fail

#36

Post by hd95489 »

RC_ITR wrote: post #23
jpmattia wrote: post #11

I don't understand the incentive for a bank to buy them at this point, because any potential buyer might as well wait until the FDIC steps in to resolve the bank. Any banking wizards at HN who can explain the dynamics? edit: At the very least, FDIC should issue a statement guaranteeing beyond the $250K/depositor limit sooner rather than later in order to stem some of the outflow.

The logic is as follows: This is a liquidity problem (so far). This isn’t because loans went bad or anything, just that they needed cash quick and had to fire sale things (the things they took losses on were US Treasuries. Mostly.) They still have a big loan book that is probably worth more than their liabilities. A large player with liquidity could get those loan assets on the cheap if they agree to provide the shor…

We’re calling it a liquidity problem only because they don’t have to mark to market. In reality it’s a solvency problem, they lost a shit ton of money by buying bonds at 0-2% that are worth 50-70% value because equivalent bonds pay 5-6%.

In theory they could hold that shit to maturity but in practice they can’t because some folks want money now and all depositors will want higher interest on deposits eventually to match market rates.

Re: SVB in talks to sell itself after attempts to raise capital fail

#37

Post by cft »

stephen_g wrote: post #28

Interesting. Looking at their website, I don’t get how SVB was supposed to work. Retail and commercial banks (as opposed to investment banks) make almost all their money from lending, especially against fairly safe assets like real-estate, but SVB doesn’t seem to have a lot of those kind of lending products advertised. Successful banks have deposits just because they need the transfers coming in to keep up liquidity…

They did bridge loans back in the day: you are running out of cash but it's fairly certain you are getting the next capital round, and that loan was secured by a special class of shares that they could either sell at the next round or keep

Re: SVB in talks to sell itself after attempts to raise capital fail

#38

Post by Vespasian »

bratao wrote: post #5
dannyw wrote: post #3

How is it possible for SVB to not have a bank run at this point?

I think that very soon they will halt withdraws. Everyone I know already did it or is doing today. Many only had a SVB account, and need some time to open another account to transfer it. (International Startups)

I don't have any experience, but wouldn't they be extra screwed if the bank goes down?

They'll probably be in line with anybody else and being foreign makes enforcement and lawsuits so much more expensive and difficult.

I guess that's a price they were willing to pay to get more favorable conditions in SV in the past as opposed to whatever they could find locally.

Re: SVB in talks to sell itself after attempts to raise capital fail

#39

Post by hd95489 »

dannyw wrote: post #3

How is it possible for SVB to not have a bank run at this point?

If you aren’t transferring out you are an idiot at this point. Even if you don’t lose money you will loose access during the failure.

My guess is the feds come in today and do it. They love to close banks on a Friday and work it through the weekend

Re: SVB in talks to sell itself after attempts to raise capital fail

#40

Post by nemo44x »

rickreynoldssf wrote: post #13

I'm feeling like this is early days of a disaster in Silicon Valley. We're at the first or second domino teetering right now. I hope a Sequoia or KPB will step up and save the bank, otherwise a lot of their portfolio investments are about to start missing payrolls.

Indeed - it really began in late November, 2021. We hit a peak then and we also started to see some of the highest flyers begin to taper off and come down. The not as darling names were first. By early 2022 we started to see the entire segment draw down and it accelerated into Q2 of 2022. The flimsiest startups that weren't generating revenue yet were the canary as they were the first to start doing layoffs in May, June, and July of 2022. As the industry came to realize that the Fed was intent on raising rates, the middle and bigger players started to plan scale downs. Q3 saw revenues starting to slip and Q4 was a bloodbath for revenues. Just about everyone seemed to cut 10%-20%.

Q1 of 2023 has stabilized a bit and began with a market rally, but it could just be a dead cat bounce on the path to lower lows as the year goes on. Seeing SVB implode suddenly is ominous not so much because of them, but what it means for the industry right now. I was hoping that we maybe hit the trough in Q4 of 2022 but it would appear this year will be bleak and I sadly suspect we'll be seeing more layoffs in the second half of this year if the first half continues to miss.

I hope I'm wrong. We are about at the point where a bear market ends (around 9 months) but that's just an average. We could very well have quite a few more months or even the entire year and into next year ahead. High flying tech has been in a bear market now for over a year, although it probably needed a correction.

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