Ord Minnett notes two distinct differences between SVB and Australian banks:
SVB customers are concentrated towards concentrated and lumpy deposits whereas household deposits make up 40% to 50% of deposits across major Australia banks
SVB had a large percentage of their assets held in investment securities, which were out of the money, whereas Australian banks primarily invest in mortgages and corporate debt
“We do not believe the conditions that allowed a run to happen on SVB exist for Australian banks,” the report said.
there info is wrong
SVB invested in govt backed securities , safe as chips stuff ....
Might have been OK at a guess if everyone didn't decide to get their money out at the same time and SVB could have held the securities to maturity (not sure of the duration). Instead I guess to free up the cash to pay the depositors they had to start trying to sell the securities at a massive loss. Don't know the figures but I guess a 1% bond purchased a year ago is now worth a lot less on the secondary market if rates are around 3%. (I am just making up the rates but they have increased considerably over the last little while).
the thing that scares me with SVB and their collapse.. is the reason it collapsed.. it just wouldnt be on my radar.. the make up of deposits and investments in treasuries is not something that I would be looking into.
Like i would just be looking at how the loan book was performing and ratios like NIM, NLM, book value, EPS growth etc for my investment decision. So i would have been wiped out as a holder.
Shouldnt be too hard on myself I guess. billions of investor funds wiped out. And Fisher Funds got caught out with Signature Bank, and they are full time guru's spending all day analyzing this stuff
there info is wrong
SVB invested in govt backed securities , safe as chips stuff ....
Correct - they invested in long term secure but low interest bonds which with rising interest rates obviously dropped in value. And than they had to sell these bonds in order to return their customers short term savings. Must be really hard in the US to get capable bankers.
“SVB collapsed because of a stupid rookie mistake with their interest-rate-risk management: They invested short-term deposits into long-term bonds. When interest rates rose, the value of the bonds fell, wiping out the equity of the bank,” James Angel, an expert on regulation of global financial markets at Georgetown University, told Al Jazeera"
Bonds are safe, but clearly they move in value with the interest rate. Financial management 101. You wonder how dumb managers must be to become a banker in the US.
----
"Prediction is very difficult, especially about the future" (Niels Bohr)
Anyway, might well improve when all these re-insurers transfer their funds into NZ to cover the flood damage claims. Never mind, they will get their money back over time by increasing the premiums.
I recon increasing tourism / migration and a handful of good harvest might help as well.
----
"Prediction is very difficult, especially about the future" (Niels Bohr)
Originally Posted by percy
Reply With Quote
Bookmarks