: SVB Financial’s stock suffers record plunge as rising client cash burn leads to actions to bolster finances

by | Mar 9, 2023 | Stock Market

Shares of Silicon Valley Bank parent company SVB Financial Group lost more than half their value, to wipe out nearly $10 billion in market capitalization, after the Santa Clara, Calif.-based financial-services company disclosed large losses from securities sales and a stock offering meant to provide a boost to its balance sheet. The bank
which helps fund technology startups backed by venture-capital firms, said it took the “strategic actions” to strengthen its financial position as rising interest rates increase pressure on public and private markets and as clients face elevated cash burn levels.

SVB also cut its first-quarter guidance ranges for net interest income (NII) to $880 million-$900 million from $925 million-$955 million, and for net interest margin (NIM) to 1.75%-1.79% from 1.85%-1.95%. The outlook for declines in average deposits was increased to the low-double-digit percentage range from mid single digits. “While VC deployment has tracked our expectations, client cash burn has remained elevated and increased further in February, resulting in lower deposits than forecasted,” Chief Executive Greg Becker wrote in a letter to shareholders. “The related shift in our funding mix to more, higher-cost deposits and short-term borrowings, coupled with higher interest rates, continues to pressure NII and NIM.” The company said in its 2022 annual report filed in late February: “We currently have minimal exposure to cryptocurrency and digital assets through loans to, deposits from and investments in clients engaged in those industries.” T …

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