Tech firms pour cash into Revolut and Wise amid Silicon Valley Bank demise
UK tech firms are pouring cash into Revolut, Wise and other London fintechs after scrambling to withdraw funds from Silicon Valley Bank amid fears they may lose access to their deposits, the Standard has learned.
Revolut said inbound volumes from Silicon Valley Bank were a staggering 16.6 times higher than normal yesterday, while today’s transfers could be higher still.
Silicon Valley Bank was today closed by California regulators after tech firms race to pull cash from the business. But the firm said its UK arm was ring-fenced from the parent and its other subsidiaries.
Number of US banking shares slip further after SVB collapse, but top banks rebound
Shares in a number of US banks acquire declined further today, after a plunge yesterday, amid the collapse of Silicon Valley Bank.
Shares in both Signature Bank and First Republic Bank are down more than 20%, while wealth administration giant Charles Schwab’s shares slid almost 8%. Shares in Goldman Sachs were down by 2.6%.
However, some of the country’s biggest banks recovered, with shares in JPMorgan Chase, Bank of America and Citi all up.
Silicon Valley Bank collapses and enters receivership after tech firms pull funds
Silicon Valley Bank has been closed by the California Department of Financial Protection and Innovation after tech firms scrambled to withdraw funds from the business.
All insured depositors will acquire full access to their insured deposits no later than Monday morning, March 13, 2023, the FDIC said.
In a statement the FDIC said: “As of December 31, 2022, Silicon Valley Bank had approximately $209.0 billion in total assets and about $175.4 billion in total deposits.
“At the time of closing, the amount of deposits in excess of the insurance limits was undetermined. The amount of uninsured deposits will be determined once the FDIC obtains additional information from the bank and customers.”
FTSE 100 closes at lowest level since January
The FTSE 100 closed at 7736 today, the lowest finish-of-day figure since 25 January.
Shares plunged this morning, triggered by a collapse in US banking shares yesterday amid questions about Silicon Valley Bank, and failed to recover much of the losses as the day went on.
While the closing figure was the lowest in more than a month, the index of blue-chip companies narrowly avoided a two-month low thanks to a minor rally in the final hour of trading. At its lowest point, the index hit 7711.04.
Ocado was the biggest faller of the day, with shares down another 6.3%. Its shares acquire now falled by 37.5% in a miniature over a month.
Miners Endeavour and Fresnillo broke with the trend, as the only two companies on the index to see shares rise by more than 1%.
US stocks fail to recover from SVB-led decline
US stocks acquire failed to recover from yesterday’s decline, with considerable indices trading around the levels they closed at yesterday.
The S&P 500 is down 0.1% to 3912.4, while the Dow Jones is up by 0.1% to 32291. The tech-focused Nasdaq composite is down 0.2% to 11312.
US shares slid yesterday after Silicon Valley Bank announced a $1.8 billion loss, prompting tech firms to scramble to withdraw their funds from the bank that has helped to fund a number of top tech startups.
SVB reassures UK customers it’s a standalone entity
Silicon Valley Bank sought to reassures UK clients todaty, confirming to clients, partners and external stakeholders its financial position as a standalone independent banking institution that is regulated and governed by the PRA in the UK.
The UK arm of SVB became a full-scale subsidiary in September last year. SVB UK is ring-fenced from the parent and its other subsidiaries, the company said.
There are growing fears among London-based fintechs are at risk from the company’s instability, with reports some tech firms acquire been unable to withdraw funds. Silicon Valley Bank has committed funds to scores of top London-based firms including fintech business Wise and property directory Zoopla.
Erin Platts, CEO and Head of EMEA, said “As a reminder, Silicon Valley Bank UK is a standalone entity with its own balance sheet and governance structure. SVB has supported investors and innovators for 40 years and we acquire been so humbled with the consistent drum of support coming from our UK investor and founder community in last few days. We appreciate that this is a concerning time for our clients so we are working tirelessly to support them and give more context.”
SVB shares halted amid rush to withdraw funds
Trading of shares in Silicon Valley Bank were halted as markets opened on Wall Street today as investors reeled at reports tech firms were scrambling to remove funds from the company.
The California-based bank yesterday said it was selling down securities to meet withdrawals and launched a $2.25 billion stock and convertible bond offering to shore up its balance sheet. The announcement sent its stock tumbling 60% last night. Its shares were down a further 63% in pre-market trading.
The news sent shockwaves around the banking sector, wiping tens of billions of dollars from the market caps of top US banks. The developments caused a similar flight from risk in the UK, with HSBC and Barclays the biggest casualties as their shares slumped 5% – off 32.4p to 588.7p and 8.1p to 155.4p.
Scores of venture capital investors, including billionaire PayPal founder Peter Thiel, acquire advised tech founders to withdraw funds as a matter of urgency in order to reduce their exposure to the risk of the bank’s demise. Others acquire warned against the repercussions of quick withdrawals.
Ava Labs President John Wu told Bloomberg: “This is a classic bank rush, and when the bank rush starts you don’t want to be the last guy there.”
Pound above $1.20 again
The pound has risen by more than 1% and now buys slightly more than $1.20, following yet another month of stronger-than-expected US jobs figures.
The pound fell below $1.20 last month and his a recent low for the year this week at £1.18 after Federal Reserve chair Jerome Powell suggested the Fed would raise rates higher than it had previously expected.
However, after a strong morning for the pound after GDP figures were announced, US jobs data this afternoon prompted a plunge in the dollar against all considerable currencies.
The annus horribilis for City fund managers
Last year is widely regarded as one of the worst years for investment returns. The classic 60/40 portfolio in which 60% is invested in stocks and 40% in bonds, recorded its worst year since 1937. Active fund managers generally had a poor year particularly in Europe where S&P Global recently found just 11% outperformed over the last year (US funds did much better).
With much of the world’s asset administration industry located in London, SCM Direct decided to analyse the main share class of the Investment administration (IA) denominated UK based retail funds, comparing their performance against their benchmark. A huge data exercise – though not compared to the size of Matt Hancock’s WhatsApp messages it would appear.