
The capital issues at SVB Financial sparked a sell-off among bank stocks on Thursday, but the tech-focused bank’s woes will likely not be a preview of wider issues in the banking system, according to Wall Street analysts. Shares of SVB dropped 60% on Thursday , and the wider selloff made it the fourth worst relative trading day for bank stocks versus the S & P 500 in the last 39 years, according to investment firm Stephens. The KBW Bank ETF dropped 7.6%. Shares of Bank of America and Wells Fargo fell more than 6% each. KBWB 5D mountain Bank stocks fell sharply on Thursday. But the issues at SVB, which included a sale of more than $20 billion in assets to raise cash, should not be seen as an issue for the industry as a whole and large banks in particular, according to Wall Street analysts. “We believe the sell-off was overdone as large banks have a lot more liquidity than smaller banks, they are more diversified with broader business models, have a lot of capital, are much better managed in regards to risk, and have a lot of oversight from regulators,” JPMorgan analyst Vivek Juneja said in a note to clients. Morgan Stanley analysts Manan Gosalia and Betsy Graseck echoed that sentiment, saying in a note that the issues at hand appeared to specific to SVB. “Current pressures facing SIVB are highly idiosyncratic and should not be viewed as a read-across to other banks we cover. Yes, funding is a headwind for the industry, but only to [net interest margin] and [earnings per share],” the Morgan Stanley note said. “We want to be very clear here… we do not believe there is a liquidity crunch facing the banking industry, and most banks in our coverage have ample access to liquidity,” the analysts added. Bank of America analyst Ebrahim Poonawala said in a note that the banking sector as a whole did not appear to be over-leveraged. “Banks are coming into this period with a relatively low loan-to-deposit ratio of 69% at YE22 vs. 80% pre-pandemic,” Poonawala said. Some analysts did caution that smaller and specialty banks could face some difficulties. SVB is the parent company of Silicon Valley Bank, which has high exposure to venture backed companies, many of which have struggled to raise more capital in the past year as interest rates have surged. RBC analyst Gerard Cassidy said that banks without large retail customer bases could be in for a rocky period. “We envision that as the Federal Reserve continues with QT, the excess deposits it created will be drained from the banking system over time. As a result, banks that have not developed strong consumer deposit bases will be forced to ‘pay up’ for funding in the wholesale funding market,” the RBC note said. And Wells Fargo analyst Jared Shaw, while saying that banks appeared to have ample access to capital, did caution that “bank runs are a self-fulfilling prophecy.” — CNBC’s Michael Bloom contributed to this report.