San Francisco Frontiers - Global bank shares gyrate as US tech-oriented bank wobbles

A day after the four biggest US banks lost a whopping $52 billion in market value following trouble at tech-oriented lender SVB Financial, European banking giants were similarly mired in the red as industry watchers questioned the odds of financial contagion.

US Treasury Secretary Janet Yellen told a Senate committee that the turmoil was on the agency's radar.

"There are recent developments that concern a few banks that I am monitoring very carefully," Janet Yellen told a Congressional committee. "When banks experience financial losses it is and should be a matter of concern."

France's BNP Paribas, Germany's Deutsche Bank and Britain's Barclays all lost about five percent, while Italy's UniCredit and Spain's Banco Santander were also decisively negative, and Tokyo-listed Mitsubishi UFJ Financial Group lost more than six percent.

Most US banks also appeared headed for another day of losses, although trading was volatile.

Shortly before 1600 GMT, Bank of America was down 1.3 percent after earlier losing more than five percent.

- Systemic problem? -

Trading in SVB itself was halted Friday a day after the bank lost more than 60 percent of its value following the disclosure that it had lost $1.8 billion in securities sales in an effort to raise funds, as it contends with declining customer deposits.

CNBC reported Friday that SVB was in talks to sell itself after attempts to raise capital failed.

SVB's travails have raised fears that a broader swathe of banks may be forced into similar transactions amid rising anxiety as central banks hike interest rates.

"The debate today is whether SVB issues are SVB's issues or the start of a bigger issue for the banking sector," said a note from Patrick O'Hare of Briefing.com. "There seems to be an allowance in the stock market for it being more of a company-specific problem or at least not a debilitating systemic issue."

But the retreat in Treasury bond yields Friday, suggests a "flight to safety" among investors, a dynamic "that made it look as if some parties at least thought SVB's issues could be a bigger issue," O'Hare said.

Investors fear that other banks could face similar losses as their bond portfolios have been hit by rising interest rates with central banks moving aggressively to tame decades-high inflation.

The higher rates have hurt the value of bonds with lower returns that lenders held before central banks launched their rate-hike campaigns last year.

Banks now face losses if they decide to sell those assets to cover a drop in deposits.

Investors fear that the Fed could tip the economy into recession if its rates are too steep and held high for too long.

"It is not a stretch to say that this episode is emblematic of the higher-for-longer rate regime we appear to be at the start of," Deutsche Bank analysts said in a note.

"We'll have to see how this story develops but something always breaks hard during or after a Fed hiking cycle," they said.

"Is this another mini wobble on this front or the start of something bigger? Tough to tell, but I would be stunned if there weren't many more casualties of this boom-and-bust cycle."

But ING senior sector strategist Suvi Platerink Kosonen said the "small size and particular nature" of SVB Financial "mean that any contagion risk remains limited."

"These events, however, act as a good reminder of the various impacts of higher rates," she said.

- Surprise problem -

As for SVB itself, the bank's "valuable customer base," should be appealing to potential buyers, said Alexander Yokum, banking analyst at CFRA Research.

"It's kind of crazy that in two days such a strong bank can go down so quickly," said Yokum, who noted that investors have been primarily worried about other negative consequences from higher interest rates, such as the effect on credit card debts and commercial real estate.

"This is typically the way it is in finance. It wasn't what we all expected would be the problem," Yokum said. "The idea of a bank run kind of came out of nowhere. It very, very quickly materialized. So I think it kind of caught people off guard."

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B.Johnson--SFF