U.S. bank stocks add to losses as regulators shutter SVB Financial

By Noel Randewich and Caroline Valetkevitch

(Reuters) – Shares of U.S. banks extended recent losses on Friday, with regional banks the hardest hit, as the failure of SVB Financial Group reverberated across the financial industry.

A California banking regulator on Friday closed SVB, putting the tech-heavy lender into receivership in the largest bank failure since the 2008 financial crisis.

The state regulator appointed the Federal Deposit Insurance Corp (FDIC) to dispose of SVBs assets in an episode that spilled over into other U.S. and European banks and sparked fears about hidden risks in the sector.

While SVBs stock was halted on Friday, shares of other mid-sized U.S. banks added to recent, heavy losses. The S&P 500 regional banks index dropped 6%, bringing its loss this week to 20%.

SVB‘s crisis comes as the U.S. Federal Reserve, locked in a battle against inflation, is raising interest rates and ending an era of cheap money, exposing vulnerabilities in the market. Investor fears about an aggressive rate hike at the Fed’s next meeting later this month were eased, however, on Friday by signs of cooling wage growth in the February jobs report.

The S&P 500 banks index, which includes all banks in the benchmark index, was down 1% and heading for a 12% loss for the week, its worst week since the global market meltdown in March 2020 following the start of the coronavirus pandemic.

“There are obvious cracks in the system, and the worry is if the Fed raises rates in two weeks, will that break something in the banking system. Thats why the banks are selling off and the market is nervous,” said Jake Dollarhide, chief executive at Longbow Asset Management in Tulsa, Oklahoma.

Signature Bank dropped 25%, while San Francisco-based First Republic Bank dropped almost 22%.

Bank of America fell 1%. JPMorgan & Chase, the most valuable U.S. bank, rebounded 1.6%, but was still on track to lose about 8% for the week.

U.S. banks have lost over $100 billion in stock market value over the past two days, with European banks losing around another $50 billion in value, according to a Reuters calculation.

(Reporting by Noel Randewich; Editing by Leslie Adler)