Silicon Valley Bank share slump rocks financial markets

Shares in Silicon Valley Bank (SVB), a key lender to technology start-ups, plummeted on Thursday as investors moved to withdraw their deposits.

The slide came after the bank announced a $1.75bn (£1.5bn) share sale to help shore up its finances.

Shares in banks have fallen around the world - with the four largest US banks, including JP Morgan and Wells Fargo, losing more than $50bn in market value.

One venture capitalist told the BBC the day's events were "wild" and "brutal".

In Friday morning trade, shares in Asian banks were also lower.

Shares in SVB saw their biggest one-day drop on record as they plunged by more than 60% and lost another 20% in after-hours trade.

The firm launched the share sale after losing around $1.8bn when it offloaded a portfolio of assets, mainly US Treasuries.

But more concerningly for the bank, many start-ups who have their money deposited have been advised to withdraw funds.

Hannah Chelkowski, founder of Blank Ventures, a fund that invests in financial technology, told the BBC the situation was "wild". She is advising companies in her portfolio to withdraw funds.

"It's crazy how it's just unravelled like this... The interesting thing is that it's the most start-up friendly bank and supported start-ups so much through Covid. Now VCs are telling their portfolio companies to pull their funds," she said.

"It's brutal," she added.

A crucial lender for early-stage businesses, SVB is the banking partner for nearly half of US venture-backed technology and healthcare companies that listed on stock markets last year.

SVB did not immediately respond to a BBC request for further comment.

In the wider market, there were concerns about the value of bonds held by banks as rising interest rates made existing bonds less valuable.

Central banks around the world - including the US Federal Reserve and the Bank of England - have sharply increased interest rates as they try to curb inflation.

Banks tend to hold large portfolios of bonds and as a result are sitting on significant potential losses. The falls in the value of bonds held by banks is not necessarily a problem unless they are forced to sell them.

But, if like Silicon Valley Bank, lenders have to sell the bonds they hold at a loss it could have a major impact on their profits.

Just days ago, a US financial watchdog, the Federal Deposit Insurance Corporation, said American lenders were sitting on a total of around $620bn of unrealised losses in their portfolios.