Silicon Valley Bank, long focusing on lending to and gathering deposits from venture capital firms, wasn't well positioned for rising interest rates. Here are a few other banks that show similar red flags.
As interest rates have risen, many banks have become more profitable because the spreads between what they earn on loans and investments and what they pay for funding has widened. But there are always exceptions.
The bank said it was repositioning to “increase asset sensitivity, to take advantage of the potential for higher short-term rates, partially lock-in funding costs, better protect net interest income and net interest margin , and enhance profitability.” The entire banking industry seemed to take it on the chin on March 9, with the KBW Nasdaq Bank Index BKX, -2.60% sinking 8%.There was more trouble later, when SVB’s stock dropped another 42% in premarket trading on March 10, after Bloomberg reported that Founders Fund had advised companies to withdraw deposits from the bank.
A bank’s net interest margin is the spread between its average yield on loans and investments and its average cost for deposits and borrowings. This is an annualized calculation. Here’s how the NIM moved for SVB Financial over the past year: Starting with a list of U.S. banks with total assets of at least $10 billion, and removing purer investment banks, such as Goldman Sachs Group Inc. GS, -2.95% and Morgan Stanley MS, -1.43%, we looked at 108 banks.
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