A buyer for Silicon Valley Bank’s (SVB) deposits and loans yesterday helped cast an uneasy calm over fragile markets, which have been roiled by worries of a credit crunch and systemic bank stress.
There are also hopes for extra support for bank funding, after Bloomberg News reported that US authorities were in early-stage deliberation about expanding emergency lending facilities.
Over the weekend, First Citizens BancShares Inc bought all the loans and deposits of SVB and gave the Federal Deposit Insurance Corp (FDIC) equity rights in its stock worth as much as US$500 million in return, the FDIC said in a statement.
Photo: AFP
Customers retain access to their accounts, North Carolina-based First Citizens said, adding that branches were to open yesterday.
SVB’s failure would cost its deposit insurance fund about US$20 billion, the FDIC estimates.
The deal has given markets some respite as it sealed the first weekend in several weeks that did not bring news of fresh banking collapses, rescues or emergency help from authorities.
“You sweep Silicon Valley off to another buyer, which is good,” IG Markets Ltd analyst Tony Sycamore said in Sydney.
“But the bigger issue is guaranteeing deposits at all those other [regional] banks ... it’s a little bit of calm before the next storm,” he added.
Last week ended with indicators of financial market stress flashing and Germany’s biggest lender Deutsche Bank AG in the crosshairs, with its shares down 8.5 percent on Friday and the cost of insuring its bonds against default up sharply.
Yesterday, bank shares in Asia were mixed — mostly steady in Australia and Tokyo, but were slipping in Hong Kong , where Standard Chartered PLC shares fell nearly 4 percent as prices caught up with a wild Friday in Europe.
The collapse of SVB little more than two weeks ago has reverberated around the world, sending US depositors fleeing smaller banks for larger cousins while the hit to confidence forced Credit Suisse Group AG into the arms of rival UBS Group AG last week.
“It’s clearly not over,” Australia and New Zealand Banking Group chief executive Shayne Elliott said in an interview posted to the bank’s Web site.
The turmoil has the potential to escalate into a bigger financial crisis, he said.
The sudden spike in tensions for banks has raised questions about whether major central banks would continue to pursue aggressive interest rate hikes to tamp down inflation, and whether tightened lending will hurt the global economy.
In Europe, bank bonds are under pressure and credit default swaps, or the cost of insurance against defaults, uneasily high.
In the US, where flows into money market funds have risen by more than US$300 billion in the past month to a record atop US$5.1 trillion, focus is on depositors’ confidence.
The SVB deal might shore some of that up.
First Citizens said it would take on assets of US$110 billion, deposits of US$56 billion and loans of US$72 billion, and expand in California. It would share further potential losses with the FDIC, which retains US$90 billion in securities held for disposal.
“Effectively you’re going to get a combination of carrots, sticks and acronyms in order to ensure you get the outcome you want and that allows [authorities] to still use interest rates to combat inflation,” Rabobank NV strategist Michael Every said. “This seems to be part and parcel of that.”
Hon Hai Precision Industry Co (鴻海精密) yesterday said that its research institute has launched its first advanced artificial intelligence (AI) large language model (LLM) using traditional Chinese, with technology assistance from Nvidia Corp. Hon Hai, also known as Foxconn Technology Group (富士康科技集團), said the LLM, FoxBrain, is expected to improve its data analysis capabilities for smart manufacturing, and electric vehicle and smart city development. An LLM is a type of AI trained on vast amounts of text data and uses deep learning techniques, particularly neural networks, to process and generate language. They are essential for building and improving AI-powered servers. Nvidia provided assistance
STILL HOPEFUL: Delayed payment of NT$5.35 billion from an Indian server client sent its earnings plunging last year, but the firm expects a gradual pickup ahead Asustek Computer Inc (華碩), the world’s No. 5 PC vendor, yesterday reported an 87 percent slump in net profit for last year, dragged by a massive overdue payment from an Indian cloud service provider. The Indian customer has delayed payment totaling NT$5.35 billion (US$162.7 million), Asustek chief financial officer Nick Wu (吳長榮) told an online earnings conference. Asustek shipped servers to India between April and June last year. The customer told Asustek that it is launching multiple fundraising projects and expected to repay the debt in the short term, Wu said. The Indian customer accounted for less than 10 percent to Asustek’s
‘DECENT RESULTS’: The company said it is confident thanks to an improving world economy and uptakes in new wireless and AI technologies, despite US uncertainty Pegatron Corp (和碩) yesterday said it plans to build a new server manufacturing factory in the US this year to address US President Donald Trump’s new tariff policy. That would be the second server production base for Pegatron in addition to the existing facilities in Taoyuan, the iPhone assembler said. Servers are one of the new businesses Pegatron has explored in recent years to develop a more balanced product lineup. “We aim to provide our services from a location in the vicinity of our customers,” Pegatron president and chief executive officer Gary Cheng (鄭光治) told an online earnings conference yesterday. “We
LEAK SOURCE? There would be concern over the possibility of tech leaks if TSMC were to form a joint venture to operate Intel’s factories, an analyst said Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) yesterday stayed mum after a report said that the chipmaker has pitched chip designers Nvidia Corp, Advanced Micro Devices Inc and Broadcom Inc about taking a stake in a joint venture to operate Intel Corp’s factories. Industry sources told the Central News Agency (CNA) that the possibility of TSMC proposing to operate Intel’s wafer fabs is low, as the Taiwanese chipmaker has always focused on its core business. There is also concern over possible technology leaks if TSMC were to form a joint venture to operate Intel’s factories, Concord Securities Co (康和證券) analyst Kerry Huang (黃志祺)
RSS