![]() Moody's downgrade specifically pointed to concerns about the bank's risk profile, pointing out that the "balance of shareholder and creditor interests posed higher than average governance challenges." ![]() That recommendation is "based on SIVB's growth normalizing after an exceptional 2020-2021 and our belief that the VC market could remain challenged for the next couple quarters." "Given the pressure on their end markets, especially the elevated levels of client cash burn, SIVB is seeing continued material outflows of client funds, both on- and off-balance sheet," wrote analysts at Wedbush, who have the equivalent of a hold rating on the stock. Rather, analysts are focused on the deposit side of the house. SVB's loan losses remain low, meaning that at least for now it's not facing the kind of credit challenges the bank dealt with during the dot-com crash and financial crisis, when charge-offs soared. In the case studies' section of the firm's website, for example, SVB highlights a loan to solar panel provider Sunrun, debt offerings to autonomous construction equipment vendor Built Robotics and financing solutions for ocean drone startup Saildrone. Suster funds the kinds of risk-taking and future-oriented ventures that rely on SVB for banking services. ![]() "I believe their CEO when he says they are solvent and not in violation of any banking ratios & goal was to raise & strengthen balance sheet." "More in the VC community need to speak out publicly to quell the panic about Mark Suster of Upfront Ventures wrote on Twitter. ![]() Does the bank's acknowledged misfortunes lead clients to pull their money and house it elsewhere? That question was circling among investors and tech execs on Thursday, even after CEO Greg Becker wrote in a letter to shareholders that the bank has "ample liquidity and flexibility to manage our liquidity position." On Wednesday, Moody's reduced SVB to Baa1 from A3, reflecting "the deterioration in the bank's funding, liquidity and profitability, which prompted SVB to announce actions to restructure its balance sheet."Ĭoncern has quickly turned to the potential contagion effect. S&P lowered its rating on SVB to BBB- from BBB, leaving it just one notch above its junk rating. SVB anticipates clients will continue to burn cash at essentially the same level as they did in the last quarter of 2022, when economic tightening was already well underway.Īnalysts at DA Davidson wrote in a report on Thursday that in terms of spending, "companies have not adjusted to the slower fundraising environment." The firm has a neutral rating on the stock and said concerns "over a slow to recover VC environment have kept us cautious on SIVB shares." That forecast is now down to $167 billion to $169 billion. In January, SVB expected average deposits for the first quarter to be $171 billion to $175 billion. "Client cash burn remains ~2x higher than pre-2021 levels and has not adjusted to the slower fundraising environment," SVB said. Total client funds have fallen for the last five quarters, as cash burn has continued at a rapid pace despite the slowdown in venture investing. "Losing a major debt provider in the venture debt market could drive the cost of funds up," Orn said.Īccording to SVB's mid-quarter update, one of the primary problems the bank faces has to do with the amount of money its customers are spending.
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