SVB Financial shares slide again on concerns over balance sheet

March 10 (Reuters) – Shares of SVB Financial Group (SIVB.O) tumbled 40% in premarket trading on Friday, piling on to steep losses logged a day earlier after the embattled lender's plans for a capital-raise fueled concerns about the strength of its balance sheet.

The stock was trading at $63.99 before the bell and was on course to open at its lowest in more than a decade, if current losses held.

The startup-focused bank's shares slumped 60% on Thursday, its biggest loss ever, after disclosing plans to raise over $2 billion from investors to counter losses from the sale of its bond portfolio.

That plan failed to calm investors who worried if the capital raise would be enough to stem a decline in deposits.

Illustration shows SVB (Silicon Valley Bank) logoSVB (Silicon Valley Bank) logo and decreasing stock graph are seen in this illustration taken March 10, 2023. REUTERS/Dado Ruvic/Illustration

SVB said its deposits were dropping faster than it had expected due to increased spending by its clients, largely technology and healthcare startups.

Venture capital investments, a crucial source of funding for the bank's clients, were also expected to be constrained in the near term as the U.S. Federal Reserve hikes rates, offering little hopes of a quick turnaround.

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The fund-raise plans also came against the backdrop of Federal Reserve Chair Jerome Powell's testimony this week, where he said the central bank would likely need to raise interest rates more than expected in response to recent strong data.

The rout at SVB, which does business as Silicon Valley Bank, spilled over into other U.S. and European banks. The S&P 500 bank index (.SPXBK) dropped 6.6% on Thursday, while a selloff in major European lenders on Friday weighed on the region's main indexes.

"Fears about unrealised losses in banks' bond portfolios, catalysed by sharp falls in U.S. banks' share prices yesterday, presents a buying opportunity for European banks in our view," Credit Suisse analysts wrote in a note.

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