California has been home to major investment banks and financial institutions like Silicon Valley Bank, SVB Financial Group, and others that provide lending and financial services, especially to technology companies and startups. However, recent financial and economic turmoil has severely impacted these banks, leading to plunging stock prices, deposit runs, asset sales, and even impending shutdowns. This crisis highlights the risks facing investment banks highly exposed to volatile sectors like tech and real estate.
Silicon Valley Bank’s $1.8B Loss and Scramble for Capital
Silicon Valley Bank’s parent SVB Financial Group lost nearly $2 billion selling assets after its deposits fell more than expected. This forced it to raise $2.25 billion by selling new shares just to stay afloat. SVB serves tech startups and VC firms which have been battered by rate hikes, sparking the rapid deposit decline that continues accelerating.
Silvergate Bank on Verge of Shutdown After Crypto Crash
Silvergate Capital Corp, a top crypto bank, announced it would shut down after the crypto market crash caused a bank run, forcing it to sell billions in assets at a steep loss to remain solvent. The California bank epitomizes the interconnected risks with the volatile crypto industry dragging down traditional finance.
Banc of California and PacWest Bancorp $3.6B Merger
Two sizable regional California banks, Banc of California and PacWest Bancorp, announced a major merger to form the newly combined $3.6 billion California Republic Bank. The deal highlights the increasing consolidation occurring in US banking as mid-sized institutions combine forces to weather the storm.
Western Alliance Grapples with Plunging Asset Values
Western Alliance Bancorp, another California investment bank, has seen its stock crater over 80% during the crisis. It sold about $4 billion of housing and commercial real estate loans that declined in value while trying to shore up its capital reserves.
Major investment banks centered in California like Silicon Valley Bank and Silvergate Capital once thrived lending to hot tech and crypto sectors. However, their overexposure backfired as these volatile industries melted down, sparking multibillion depositor runs. Scrambling mergers between the likes Banc of California and PacWest symbolize regional US banks combining forces amidst the ongoing financial storm.