The S&P 500 bank index (.SPXBK) collapsed almost 6% on Thursday, its biggest one-day drop in over two years as investors took off from the industry after SVB Financial Group’s (SIVB.O) share sale announcement and crypto bank Silvergate’s decision to lessen operations.
SVB shares, whose operating segments comprise Silicon Valley Bank, collapsed over 50% in their deepest single drop on record after the company announced a $1.75 billion share sale late on Wednesday. SVB is dealing with cash burn as a consequence of lower deposits from startups dealing with a downturn.
First Republic, headquartered in San Francisco, dropped 15% after hitting its lowest level since October 2020.
The SPDR S&P regional banking ETF (KRE.P) was down more than 7% to its lowest level since January 2021.
Major U.S. banks were also impacted, with JPMorgan (JPM.N) and Bank of America (BAC.N) both falling more than 5%.
First Republic and SVB were the S&P 500’s deepest percentage fallers in Thursday’s trading session, while JPMorgan’s loss measured more than any other stock on the S&P 500’s 1.1% slump at mid-day.
“The Silicon Valley raise got everybody nervous about people’s capital levels and what deposits are doing. A lot of institutional investors don’t feel great about owning certain banks right now,” R.J. Grant, trading head at Keefe, Bruyette & Woods in New York, agreed.
“It just gets people freaked out because Silicon Valley, historically has been a very strong, well-run bank. If they’re having issues right now, people are wondering what about other banks that are of lesser quality and that don’t have the reputation that Silicon Valley Bank has.”
Investors were also concerned about the downturn of cryptocurrency-focused lender Silvergate Capital (SI.N), which fell 22% after announcing late Thursday that it planned to relax operations and voluntarily liquidate after suffering losses as a result of the collapse of crypto exchange FTX.
Signature Bank (SBNY.O), a Silvergate competitor, fell 9.4%.