Global financial stocks lose $465 billion on Silicon Valley Bank impact worry

Global financial stocks have lost $465 billion in market value in two days as investors cut exposure to lenders from New York to Japan in the wake of Silicon Valley Bank's collapse.

Losses widened Tuesday, with the MSCI Asia Pacific Financials Index dropping as much as 2.7% to the lowest since Nov. 29. Mitsubishi UFJ Financial Group Inc. slid as much as 8.3% in Japan, while South Korea's Hana Financial Group Inc. fell 4.7% and Australia's ANZ Group Holdings Ltd. lost 2.8%.

There are concerns that financial firms could see an impact from their investments in bonds and other instruments on the SVB-induced worry. Treasury yields plunged Monday amid expectations the Federal Reserve will hold off raising rates due to turmoil in the banking system.

"The financial markets are walking on eggshells," John Woods, Credit Suisse Group AG's chief investment officer for Asia-Pacific, said in an interview with Bloomberg Television. "We really need to know precisely what impact this is likely to have around the broader market. My sense is that the Fed will probably pause because I think this is largely to do with liquidity risk."

The aggregate market value of companies included in the MSCI World Financials Index and the MSCI EM Financials Index has dropped about $465 billion since Friday. US regional banks were among the hardest hit Monday as the KBW Regional Banking Index sank 7.7%, its sharpest plunge since June 2020.

Photo: Bloomberg

First Republic Bank's shares have plunged almost 73% in three sessions to be the top losers on the MSCI World Financials gauge in the period. Moody's put all long-term ratings of the lender on review for downgrade.

Shares of European banks and insurers also slumped on Monday. Credit Suisse Group AG's stock tumbled as much as 15% to a fresh record low and the cost of insuring its bonds against default climbed to an all-time high amid concern about broader contagion in the banking industry from SVB's collapse.

Japan Bank

Major northern Asia banks mostly have "minimal risk of the sudden run on deposits that crumpled Silicon Valley Bank" given their solid deposits, asset mixes and liquidity, Bloomberg Intelligence analyst Francis Chan wrote in a note. "Smaller lenders may harbor liquidity and credit risks that could easily be overlooked."

Japanese banks feature prominently among the highest unrealized loss-to-equity ratios in the region, according to data on about 130 Asia Pacific lenders with more than $5 billion in assets compiled by Bloomberg. Jimoto Holdings Inc., Tsukuba Bank Ltd. and Fukushima Bank Ltd. are among those with unrealized loss-to-equity ratios of at least 9%.

All three, which have market caps below $150 million each, have fallen more than 10% in three days. Japanese financial stocks had surged since December amid signs the nation's central bank was pivoting toward tightening after years of ultra-loose monetary policy.

"I'm selling banks and insurers today," said Taku Ito, chief fund manager at Nissay Asset Management Corp. "No doubt it's a defeat but I think a lot of fund managers are also doing the same because bank shares had been rising and a lot of growth managers have been increasing bank shares."