One year after Silicon Valley Bank's failure and foreclosure, “local bank stock prices remain volatile relative to other types of financial institutions,” the report said. observer“suggests that investor concerns about the sector persist.”
But not everyone suffered.
Big companies like JPMorgan Chase & Co. benefited from the crisis. After acquiring First Republic's $212.6 billion in loans and $92.4 billion in deposits for just over $10 billion in May 2023, JPMorgan posted a 67% increase in profit in the quarter from a year earlier. Overall, capital flowed into large commercial banks as customers sought safer institutions to store their funds.
And what happened to Silicon Valley Bank? Axios Report:
SVB is still the same bank that customers love today, but with improved risk management and some tweaks, including lower deposit requirements for start-up borrowers, said president Marc Cadieux. he told Axios last month. Cadieux said 81% of SVB customers from a year ago still bank with SVB, and “thousands” have returned after initially switching.
“I think there was an inference that this was a regional bank crisis, but it wasn't. They were niche banks,” Citizens CEO Bruce Van Thorne told Axios. “The failure was in governance and the business model.”
As the CEO of Citizens, the 14th largest bank in the United States, Van Thorne was asked by CNN what will cause other banks to fail in 2023.
CEO Van Saun: Both those banks [Signature Bank and Silicon Valley Bank] Assets went from $50 billion to over $200 billion in four years. They were vulnerable to adverse effects because they grew rapidly, had a high proportion of uninsured deposits, and had a highly concentrated and narrow customer base. [deposit] Flight Risks. They also borrowed short term and invested long term, a cardinal sin of banking. They can't manage interest rate risk well because they've grown slowly over the years and didn't have the strength to prepare for what would have happened if they had been subject to the same heavy regulations as a large bank like ours. did.
CNN: Who deserves more responsibility: the failing bank's management for failing to ensure the appropriate guardrails were in place, or the financial regulators whose job it is to identify red flags?
Van Saun: It's a joint injury…
CNN: [W]What about commercial real estate? The number of people working in offices is far lower than before the pandemic. Are you preparing for a new chapter of stress in banking? What are citizens doing to cushion the high losses that can occur in this sector, where nearly a fifth of loans occur?
Van Saun: I have to look under the covers. The nature of our portfolio is important.
This is fine within commercial real estate, industrial, warehouse, and distribution spaces. Apartment complexes are generally okay. In terms of offices, we have parts of our life sciences business, such as laboratory research facilities, which have not had to be closed during COVID-19, so they are very safe. [Loans to general office buildings are riskier though, he said.] We've been through all of that and say we're going to lose some money here, but we're not going to lose the shirt and we've got a lot of reserves against them. We work with the most senior people on a loan by loan basis. I think it's a well-managed process.
