After shares in SVB Financial, a major lender to the tech industry, fell by 60% on Thursday, the four largest banks in the United States lost $52 billion in market value.
After announcing a stock offering and selling securities to raise much-needed cash in response to declining deposits, SVB Financial frightened the markets.
After Frankfurt’s stock market opened on Friday, Deutsche Bank’s shares fell by almost 10% before recovering to trade around 7% lower. It was one of the biggest losers.
In London, Barclays, Lloyds and NatWest shed as much as five percent prior to paring back certain misfortunes.
BNP Paribas was down more than 3%, while Societe Generale was down more than 5% in France. Switzerland’s UBS and Credit Suisse sank by more than four percent.
Mitsubishi UFJ Financial Group, which is listed in Tokyo, lost more than 6%, HSBC lost about 3% in Hong Kong, and National Australia Bank lost 3% in Sydney.
SVB Monetary uncovered that it had lost $1.8 billion following the deals, raising worries that different banks could be dealing with comparable issues.
According to sources familiar with the situation, the Wall Street Journal reported on Thursday that SVB chief executive Greg Becker attempted to reassure customers regarding the financial health of the bank.
According to the newspaper, Becker advised them not to withdraw their deposits from the bank and not to incite panic or fear regarding its situation.
In an effort to contain decades-high inflation, central banks around the world have been raising interest rates.
The value of bonds with lower returns that lenders held prior to central banks’ rate-hiking campaigns last year has been impacted by the higher rates.
If banks decide to sell those assets to make up for the drop in deposits, they now face losses.
According to Swissquote bank analyst Ipek Ozkardeskaya, “in theory, the rising interest rates would have been a boon for the banking sector because it would top their net interest income, as they would start making money on deposits, yet again.”
She stated, “But the problem is that the interest rates rose too quickly.”