Bank Share Prices Hit Amid Bankruptcy Concerns

Several major US banks have been hit by investor selloffs after the insolvency of Silicon Valley Bank and the planned liquidation of Silvergate Bank.

Trading in the shares of PacWest, Western Alliance, and First Republic banks was halted by stock exchanges on Friday due to excessive volatility, according to the Financial Times, with prices falling as much as 40-50%. The moves came as investors reacted to the news that Silicon Valley Bank had been closed by California regulators after customers sought to withdraw as much as $42 billion in total deposits.

Western Alliance Bank, based in Arizona, issued a financial update amid the volatility. It emphasized that its deposit base “remains strong” and has increased by $7.8 billion since the end of 2022, reaching $61.5 billion as of March 9.

It added that liquidity “remains robust” with $2.5 billion of cash on the balance sheet and $5.3 billion worth of assets available for sale. In addition, the bank had a large amount of credit available from financial institutions and the Federal Home Loan Bank of San Francisco, it said.

“Asset quality remains excellent, and we have experienced no significant changes since year end, including classified assets, non-performing assets, and charge-offs,” Washington Alliance said.

Meanwhile, New York-based Signature Bank — which has also seen its share price fall substantially due to its exposure to crypto-related companies — issued a statement to reassure investors and stakeholders of its ongoing strength.

The bank has been seeking to actively reduce its activity in the cryptocurrency sector and had a relationship with the failed digital asset exchange FTX — although this was only depository and accounted for less than 0.1% of Signature’s total deposits.

The bank “does not invest in, does not trade, does not hold, does not custody and does not lend against or make loans collateralized by digital assets”, said co-founder and CEO Joseph DePaolo in a statement last week.

“We have repeatedly communicated that our relationships in the digital asset space are limited to US dollar deposits only, and we remain fully committed to executing on our plan to deliberately reduce these deposits further,” DePaolo added.

In a financial update, Signature Bank outlined its large “well-diversified” portfolio of assets, and emphasized that “80% of deposits [come] from middle market businesses such as law firms, accounting practices, healthcare companies, manufacturing companies and real estate management firms”.