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Strategies & Market Trends : Value Investing
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To: Elroy who wrote (72505)3/9/2023 10:39:38 PM
From: Spekulatius6 Recommendations

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SIVB held deposits associated with venture capital and has invested them loans, but also treasuries. They were swamped with deposits from VC money, so own ~$120B in treasuries and MBS with an equity base of $16B (~$11.5B tangible). These treasuries purchases in 2021 now have lost quite a bit of value, but even that is not a problem from a regulatory Capital perspective as long as they don’t have to realize the losses by selling them.

The problem is that these VC deposits are now fleeting and they are now forced to sell those security with realizes these losses and depletes regulatory capital.

This is the same issue that occurred with SI which had deposits related to crypto. Most banks sit on losses with their treasuries (BAC has about $120B in losses) but BAC has stable deposits, so they don’t need to sell them. In despite the drag from these low interest rate securities has shown rising NIM.

So any bank that loses a lot of deposits can get into trouble now if they have to sell securities that were acquired before the rise in interest rates and that sit on market to market losses. I don’t really think it’s a big issue except for pockets of banks where deposits were hit money (VC funds, crypto money ).
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