- On 8 March, Silicon Valley Bank (SVB) announced a US$2.25bn capital raising exercise following losses on the sale of securities. Customers reacted by attempting to withdraw US42bn of deposits. On 10 March, SVB was closed and taken over by the authorities due to inadequate liquidity and insolvency.
- - Read this at SGinvestors.io -
- We remain positive on Singapore banks – DBS (SGX:D05), OCBC (SGX:O39), UOB (SGX:U11). Dividend yields of Singapore banks are attractive at 5.7% with possible upside surprise due to excess capital ratios and push towards higher ROEs. Singapore banks differ from SVB as majority of assets are in loans and higher interest rates can be passed on to customers.
SVB's large concentration on securities, majority in “held-to-maturity” securities
- - Read this at SGinvestors.io -
- As at 31 Dec 2022, SVB had US$15.2bn of unrealised losses on their HTM securities, which makes up ~93% of their total equity.
- In comparison, the 3 local Singapore banks only hold securities amounting to ~15% of total assets. While Singapore banks also faced bond losses, there were less significant as majority of assets were variable rate loans where they could pass on the higher interest rates.
- See Figure 1 in the report attached below for summary and comparison of SVB’s key ratios vs Singapore banks.
Assets and deposits growth spiked, but LDR and CASA ratio remained low
- Read more at SGinvestors.io.
