[ad_1]
Adobe Inc. shares rallied in the extended session Wednesday after the software company topped Wall Street expectations for the quarter and hiked its outlook, while anticipating its acquisition of interactive-design platform Figma will close by the end of the year.
Adobe ADBE shares rose 5% after hours, following a less than 0.1% gain to close the regular session at $333.61.
The…
[ad_2]
[ad_1]
Diamond Sports Group, which operates regional sports networks that televise nearly half of all MLB, NBA and NHL games, filed for Chapter 11 bankruptcy protection Tuesday.
Diamond is owned by Sinclair Broadcasting Group Inc. SBGI, and operates its networks under the Bally Sports name.
In a statement Tuesday, Diamond said it was finalizing a…
[ad_2]
[ad_1]
Shareholders of AMC Entertainment Holdings Inc. voted overwhelmingly in support of the company’s proposal to convert AMC Preferred Equity units into shares of common stock Tuesday.
AMC’s AMC stock, which was repeatedly halted for volatility Monday, fell 13.8%. APEs APE rose 9.3%.
In January, AMC announced the special meeting of shareholders…
[ad_2]
[ad_1]
Rivian Automotive Inc.’s stock fell more than 3% Monday after news that the electric-vehicle maker and Amazon.com Inc. are discussing possible changes to their deal for electric delivery vans.
Citing people familiar with the matter, the Wall Street Journal reported Monday that the companies are in talks to end the exclusivity part of their electric-van deal. The talks started after Amazon’s order for the year was at the low end of the previous range, the report said.
A…
[ad_2]
[ad_1]
The run on Silicon Valley Bank (SVB) SIVB— on which nearly half of all venture-backed tech start-ups in the United States depend — is in part a rerun of a familiar story, but it’s more than that. Once again, economic policy and financial regulation has proven inadequate.
The news about the second-biggest bank failure in U.S. history came just days after Federal Reserve Chair Jerome Powell assured Congress that the financial condition of America’s banks was sound. But the timing should not be surprising. Given the large and…
[ad_2]
[ad_1]
Silicon Valley Bank has failed following a run on deposits, after its parent company’s share price crashed a record 60% on Thursday.
Trading of SVB Financial Group’s
SIVB,
stock was halted early Friday, after the shares plunged again in premarket trading. Treasury Secretary Janet Yellen said SVB was one of a few banks she was “monitoring very carefully.” Reaction poured in from several analysts who discussed the bank’s liquidity risk.
California regulators closed Silicon Valley Bank and handed the wreckage over to the Federal Deposit Insurance Administration later on Friday.
Below is the same list of 10 banks we highlighted on Thursday that showed similar red flags to those shown by SVB Financial through the fourth quarter. This time, we will show how much they reported in unrealized losses on securities — an item that played an important role in SVB’s crisis.
Below that is a screen of U.S. banks with at least $10 billion in total assets, showing those that appeared to have the greatest exposure to unrealized securities losses, as a percentage of total capital, as of Dec. 31.
Some media reports have referred to SVB of Santa Clara, Calif., as a small bank, but it had $212 billion in total assets as of Dec. 31, making it the 17th largest bank in the Russell 3000 Index
RUA,
as of Dec. 31. That makes it the largest U.S. bank failure since Washington Mutual in 2008.
One unique aspect of SVB was its decades-long focus on the venture capital industry. The bank’s loan growth had been slowing as interest rates rose. Meanwhile, when announcing its $21 billion dollars in securities sales on Thursday, SVB said it had taken the action not only to lower its interest-rate risk, but because “client cash burn has remained elevated and increased further in February, resulting in lower deposits than forecasted.”
SVB estimated it would book a $1.8 billion loss on the securities sale and said it would raise $2.25 billion in capital through two offerings of new shares and a convertible bond offering. That offering wasn’t completed.
So this appears to be an example of what can go wrong with a bank focused on a particular industry. The combination of a balance sheet heavy with securities and relatively light on loans, in a rising-rate environment in which bond prices have declined and in which depositors specific to that industry are themselves suffering from a decline in cash, led to a liquidity problem.
Banks leverage their capital by gathering deposits or borrowing money either to lend the money out or purchase securities. They earn the spread between their average yield on loans and investments and their average cost for funds.
The securities investments are held in two buckets:
In its regulatory Consolidated Financial Statements for Holding Companies—FR Y-9C, filed with the Federal Reserve, SVB Financial, reported a negative $1.911 billion in accumulated other comprehensive income as of Dec. 31. That is line 26.b on Schedule HC of the report, for those keeping score at home. You can look up regulatory reports for any U.S. bank holding company, savings and loan holding company or subsidiary institution at the Federal Financial Institution Examination Council’s National Information Center. Be sure to get the name of the company or institution right — or you may be looking at the wrong entity.
Here’s how accumulated other comprehensive income (AOCI) is defined in the report: “Includes, but is not limited to, net unrealized holding gains (losses) on available-for-sale securities, accumulated net gains (losses) on cash flow hedges, cumulative foreign currency translation adjustments, and accumulated defined benefit pension and other postretirement plan adjustments.”
In other words, it was mostly unrealized losses on SVB’s available-for-sale securities. The bank booked an estimated $1.8 billion loss when selling “substantially all” of these securities on March 8.
On the regulatory call reports, AOCI is added to regulatory capital. Since SVB’s AOCI was negative (because of its unrealized losses on AFS securities) as of Dec. 31, it lowered the company’s total equity capital. So a fair way to gauge the negative AOCI to the bank’s total equity capital would be to divide the negative AOCI by total equity capital less AOCI — effectively adding the unrealized losses back to total equity capital for the calculation.
Getting back to our list of 10 banks that raised similar red margin flags to those of SVB, here’s the same group, in the same order, showing negative AOCI as a percentage of total equity capital as of Dec. 31. We have added SVB to the bottom of the list. The data was provided by FactSet:
| Bank | Ticker | City | AOCI ($mil) | Total equity capital ($mil) | AOCI/ TEC – AOCI | Total assets ($mil) |
| Customers Bancorp Inc. |
CUBI, |
West Reading, Pa. | -$163 | $1,403 | -10.4% | $20,896 |
| First Republic Bank |
FRC, |
San Francisco | -$331 | $17,446 | -1.9% | $213,358 |
| Sandy Spring Bancorp Inc. |
SASR, |
Olney, Md. | -$132 | $1,484 | -8.2% | $13,833 |
| New York Community Bancorp Inc. |
NYCB, |
Hicksville, N.Y. | -$620 | $8,824 | -6.6% | $90,616 |
| First Foundation Inc. |
FFWM, |
Dallas | -$12 | $1,134 | -1.0% | $13,014 |
| Ally Financial Inc. |
ALLY, |
Detroit | -$4,059 | $12,859 | -24.0% | $191,826 |
| Dime Community Bancshares Inc. |
DCOM, |
Hauppauge, N.Y. | -$94 | $1,170 | -7.5% | $13,228 |
| Pacific Premier Bancorp Inc. |
PPBI, |
Irvine, Calif. | -$265 | $2,798 | -8.7% | $21,729 |
| Prosperity Bancshare Inc. |
PB, |
Houston | -$3 | $6,699 | -0.1% | $37,751 |
| Columbia Financial, Inc. |
CLBK, |
Fair Lawn, N.J. | -$179 | $1,054 | -14.5% | $10,408 |
| SVB Financial Group |
SIVB, |
Santa Clara, Calif. | -$1,911 | $16,295 | -10.5% | $211,793 |
| Source: FactSet | ||||||
Click on the tickers for more about each bank.
Read Tomi Kilgore’s detailed guide to the wealth of information available for free on the MarketWatch quote page.
Ally Financial Inc.
ALLY,
— the third largest bank on the list by Dec. 31 total assets — stands out as having the largest percentage of negative accumulated comprehensive income relative to total equity capital as of Dec. 31.
To be sure, these numbers don’t mean that a bank is in trouble, or that it will be forced to sell securities for big losses. But SVB had both a troubling pattern for its interest margins and what appeared to be a relatively high percentage of securities losses relative to capital as of Dec. 31.
There are 108 banks in the Russell 3000 Index
RUA,
that had total assets of at least $10.0 billion as of Dec. 31. FactSet provided AOCI and total equity capital data for 105 of them. Here are the 20 which had the highest ratios of negative AOCI to total equity capital less AOCI (as explained above) as of Dec. 31:
| Bank | Ticker | City | AOCI ($mil) | Total equity capital ($mil) | AOCI/ (TEC – AOCI) | Total assets ($mil) |
| Comerica Inc. |
CMA, |
Dallas | -$3,742 | $5,181 | -41.9% | $85,406 |
| Zions Bancorporation N.A. |
ZION, |
Salt Lake City | -$3,112 | $4,893 | -38.9% | $89,545 |
| Popular Inc. |
BPOP, |
San Juan, Puerto Rico | -$2,525 | $4,093 | -38.2% | $67,638 |
| KeyCorp |
KEY, |
Cleveland | -$6,295 | $13,454 | -31.9% | $189,813 |
| Community Bank System Inc. |
CBU, |
DeWitt, N.Y. | -$686 | $1,555 | -30.6% | $15,911 |
| Commerce Bancshares Inc. |
CBSH, |
Kansas City, Mo. | -$1,087 | $2,482 | -30.5% | $31,876 |
| Cullen/Frost Bankers Inc. |
CFR, |
San Antonio | -$1,348 | $3,137 | -30.1% | $52,892 |
| First Financial Bankshares Inc. |
FFIN, |
Abilene, Texas | -$535 | $1,266 | -29.7% | $12,974 |
| Eastern Bankshares Inc. |
EBC, |
Boston | -$923 | $2,472 | -27.2% | $22,686 |
| Heartland Financial USA Inc. |
HTLF, |
Denver | -$620 | $1,735 | -26.3% | $20,244 |
| First Bancorp |
FBNC, |
Southern Pines, N.C. | -$342 | $1,032 | -24.9% | $10,644 |
| Silvergate Capital Corp. Class A |
SI, |
La Jolla, Calif. | -$199 | $603 | -24.8% | $11,356 |
| Bank of Hawaii Corp |
BOH, |
Honolulu | -$435 | $1,317 | -24.8% | $23,607 |
| Synovus Financial Corp. |
SNV, |
Columbus, Ga. | -$1,442 | $4,476 | -24.4% | $59,911 |
| Ally Financial Inc |
ALLY, |
Detroit | -$4,059 | $12,859 | -24.0% | $191,826 |
| WSFS Financial Corp. |
WSFS, |
Wilmington, Del. | -$676 | $2,202 | -23.5% | $19,915 |
| Fifth Third Bancorp |
FITB, |
Cincinnati | -$5,110 | $17,327 | -22.8% | $207,452 |
| First Hawaiian Inc. |
FHB, |
Honolulu | -$639 | $2,269 | -22.0% | $24,666 |
| UMB Financial Corp. |
UMBF, |
Kansas City, Mo. | -$703 | $2,667 | -20.9% | $38,854 |
| Signature Bank |
SBNY, |
New York | -$1,997 | $8,013 | -20.0% | $110,635 |
Again, this is not to suggest that any particular bank on this list based on Dec. 31 data is facing the type of perfect storm that has hurt SVB Financial. A bank sitting on large paper losses on its AFS securities may not need to sell them. In fact Comerica Inc.
CMA,
which tops the list, also improved its interest margin the most over the past four quarters, as shown here.
But it is interesting to note that Silvergate Capital Corp.
SI,
which focused on serving clients in the virtual currency industry, made the list. It is shuttering its bank subsidiary voluntarily.
Another bank on the list facing concern among depositors is Signature Bank
SBNY,
of New York, which has a diverse business model, but has also faced a backlash related to the services it provides to the virtual currency industry. The bank’s shares fell 12% on Thursday and were down another 24% in afternoon trading on Friday.
Signature Bank said in a statement that it was in a “strong, well-diversified financial position.”
[ad_2]
[ad_1]
Silicon Valley Bank has been closed by the California Department of Financial Protection and Innovation, and the Federal Deposit Insurance Corporation (FDIC) has been appointed receiver, becoming the first FDIC-backed institution to fail this year.
The news comes amid a crisis at parent SVB Financial Group
SIVB,
which lost a record 60% of its value on Thursday, after it disclosed large losses from securities sales and announced a dilutive stock offering along with a profit warning. The stock was halted premarket Friday amid reports the company was seeking a buyer.
The FDIC, which insures deposits of up to $250,000 at eligible banks, said all insured depositors will have full access to their accounts no later than Monday morning. Uninsured depositors will get a receivership certificate and may be entitled to dividends once the FDIC sells the bank’s assets.
The bank had 13 branches in California and Massachusetts and will reopen on Monday. As of Dec. 31, it had about $209 billion in total assets, and about $175.4 billion in deposits.
That makes it the biggest bank failure since Washington Mutual Inc. was brought down during the financial crisis of 2008.
See now: 10 banks that may face trouble in the wake of the SVB Financial Group debacle
“At the time of closing, the amount of deposits in excess of the insurance limits was undetermined,” said the FDIC. “The amount of uninsured deposits will be determined once the FDIC obtains additional information from the bank and customers.”
Read: Treasury monitoring a few banks ‘very carefully’ amid Silicon Valley Bank’s woes, Yellen says
Related: Silicon Valley Bank collapse a cautionary tale, says New Constructs
Customers with more than $250,000 in their accounts should contact the FDIC at 1-866-799-0959.
The last FDIC-backed bank to close was Almena State Bank, Almena, Kansas, back in October of 2020, said the FDIC.
The bank’s collapse has come swiftly just days after the parent announced a huge loss on bondholdings after it was caught out by interest rate increases. Some venture-capital firms reportedly told their startup clients to pull their money from the bank, triggering a classic run on the bank.
On Friday, employees were told to “work from home today and until further notice,” the Wall Street Journal reported, citing an email it had obtained.
[ad_2]
[ad_1]
Shares of Silicon Valley Bank parent company SVB Financial Group plummeted Thursday toward the biggest one-day selloff since the dotcom boom, after the Santa Clara, Calif.-based financial-services company disclosed large losses from securities sales and a stock offering meant to provide a boost to its balance sheet.
The bank
SIVB,
which helps fund technology startups backed by venture-capital firms, said it took the “strategic actions” to strengthen its financial position as rising interest rates increase pressure on public and private markets and as clients face elevated cash burn levels.
SVB also cut its first-quarter guidance ranges for net interest income (NII) to $880 million-$900 million from $925 million-$955 million and for net interest margin (NIM) to 1.75%-1.79% from 1.85%-1.95%. The outlook for declines in average deposits was increased to the low-double-digit percentage range from mid single digits.
“While VC deployment has tracked our expectations, client cash burn has remained elevated and increased further in February, resulting in lower deposits than forecasted,” Chief Executive Greg Becker wrote in a letter to shareholders. “The related shift in our funding mix to more, higher-cost deposits and short-term borrowings, coupled with higher interest rates, continues to pressure NII and NIM.”
The stock dove 41% in morning trading, outpacing the S&P 500’s
SPX,
losers by a wide margin. It was suffering the biggest one-day selloff since its record 42.3% decline on Sept. 10, 1998.
SVB said late Wednesday it sold about $21 billion worth of its available-for-sale securities. As of Dec. 31, the company had $26.1 billion in AFS securities.
The sale will result in a loss of about $1.8 billion in the first quarter of 2023, while the FactSet consensus for first-quarter net income was $274.8 million.
“The sale of substantially all of our AFS securities will enable us to increase our asset sensitivity, partially lock in funding costs, better insulate net interest income (NII) and net interest margin (NIM) from the impact of higher interest rates, and enhance profitability,” Becker wrote.
Separately, the company said it plans to offer for sale $2.25 billion worth of equity securities to bolster its financial position.
The offering includes $1.25 billion worth of common stock, which represents 13.4% of the company’s current market capitalization of $9.33 billion, and $500 million worth of mandatory convertible preferred stock. SVB has also entered into an agreement with private-equity investor General Atlantic to buy $500 million worth of common stock in a separate private transaction.
“Our financial position enables us to take these strategic actions, which are intended to further bolster that position now and over the long term,” the bank said in a statement.
JPMorgan analyst Steven Alexopoulos cut his stock-price target to $270 from $300 but reiterated the overweight rating he’s had on SVB for at least the past three years. The stock target is above Tuesday’s closing price of $267.83.
“While this is yet another setback that will result in another negative [earnings-per-share] revision, we continue to believe that it remains a question of when rather than if the war chest of dry powder on the sidelines starts to get deployed at a much more rapid pace,” Alexopoulos wrote in a note to clients.
The stock, which was headed for its lowest close since April 2020, has tumbled 28.3% over the past three months and plunged 70.7% over the past 12 months. In comparison, the Financial Select Sector SPDR exchange-traded fund
XLF,
has lost 7.1% over the past year and the S&P 500 has shed 6.6%.
[ad_2]
[ad_1]
General Motors Co. on Thursday announced employee buyouts that are expected to lead to charges of $1.5 billion as the auto maker seeks to be “nimble in an increasingly competitive market.”
GM’s
GM,
stock slipped 2% after the news. The announcement comes a little over a week after the Detroit News reported that GM was cutting about 500 jobs, which came roughly a month after the company said it wasn’t planning layoffs.
“By permanently bringing down structured costs, we can improve vehicle profitability and remain nimble in an increasingly competitive market,” a GM spokesperson said.
The buyouts, which the company is calling a voluntary separation program, are being offered to U.S. salaried employees with at least five years of service and to global executives with at least two years of service, GM said.
The program offers employees “an opportunity to make a career change or retire earlier,” the company said. “Employees are strongly encouraged to consider the program.”
GM said in late January that it planned to implement a program aimed at cutting costs by $2 billion per year by 2024.
The buyouts are part of that effort, which also includes reducing vehicle complexity and cutting discretionary spending, GM said.
U.S. employees taking the buyout would receive 1 month of pay for every year of service, up to 12 months, as well as COBRA benefits, a prorated performance bonus and help finding a new job.
GM said it expects to record the bulk of the separation charges in the first half of 2023.
The Wall Street Journal reported Wednesday that GM’s crucial pivot to electric vehicles had “stalled.”
GM has not followed competitors Ford Motor Co.
F,
and Tesla Inc.
TSLA,
in announcing price cuts, with Chief Executive Mary Barra saying in January she believed “we’re priced where we need to be.”
GM in January reported fourth-quarter earnings that beat Wall Street expectations and issued guidance that was also well above forecast.
The company said it had led the U.S. auto industry in sales and had the largest year-over-year increase in market share among auto makers, thanks to “strong demand for our products and improved supply chain conditions.”
GM’s stock has run up 18.2% year to date through Wednesday, while the S&P 500
SPX,
has gained 4%.
[ad_2]
[ad_1]
Silvergate Capital Corp.
SI,
shares plunged more than 30% in after-hours trading Wednesday after the company said it intended to wind down operations and voluntarily liquidate its subsidiary Silvergate Bank, a crypto-friendly lender.
The stock’s plunge would take it to a record low if losses hold through regular trading Thursday.
The La Jolla, Calif.-based lender made the announcement after it said last week in a regulatory filing that it was at risk of “being less than well-capitalized,” and discontinued its crypto-payments network.
As one of the few crypto-friendly banks, the liquidation of Silvergate Bank points to uncertainty in the future relationships between crypto companies and banks, who play an essential role in the conversion of fiat currencies into crypto.
Read: Crypto traders may lean toward stablecoins after Silvergate ceases crypto payments network
Silvergate Bank’s liquidation plan includes full repayment of all deposits, according to a statement Wednesday.
The company is considering the best way to resolve claims and preserve the residual value of its assets, Silvergate Capital said. All of the company’s other deposit-related services remain operational, it said.
Silvergate also said it hired Centerview Partners as financial adviser and Cravath, Swaine & Moore LLP as legal adviser.
Several crypto companies, such as Coinbase Global Inc.
COIN,
Galaxy Digital, Paxos and Circle, said last week that they would cease some or all payment transactions with Silvergate Bank.
Representatives at Silvergate didn’t immediately respond to a request seeking comment.
Signature Bank
SBNY,
another crypto-friendly lender, saw its shares slide 3.7% in after-hours trading Wednesday.
Major cryptocurrencies were steady Wednesday. Bitcoin
BTCUSD,
lost 0.3% to around $21,981, while ether
ETHUSD,
gained 0.2% to about $1,550, according to CoindDesk data.
Read: Here’s the real challenge facing Silvergate and other ‘crypto banks,’ says this short seller
[ad_2]
[ad_1]
Silicon Valley could use a reboot. The biggest players aren’t growing, and more than a few are seeing sharp revenue declines. Regulators seem opposed to every proposed merger, while legislators push for new rules to crack down on the internet giants. The Justice Department just can’t stop filing antitrust suits against Google. The initial public offering market is closed. Venture-capital investments are plunging, along with valuations of prepublic companies. Maybe they should try turning the whole thing on and off.
The only strategy that seems to be working is to lay people off. Tech CEOs suddenly are channeling Marie Kondo, tidying up and keeping only the people and projects that “spark joy,” or at least support decent operating margins. Layoffs.fyi reports that tech companies have laid off more than 122,000 people already this year.
[ad_2]
[ad_1]
Intel
is cutting its dividend. In a treacherous environment for the economy and profits, more companies could do the same.
On Wednesday, Intel (ticker: INTC) cut its dividend by 66% to an annual 50 cents a share, helping push the stock down about 16% in the past month. Intel has lost market share for chips to
Advanced Micro Devices
(AMD) and has struggled to meet Wall Street’s earnings targets. Weighing on earnings is weak PC demand, with year-over-year declines in sales. A dividend cut this large may partly reflect the economic environment, but also the company’s own problems.
[ad_2]
[ad_1]
China has announced new rules on overseas IPOs, potentially sparking the resumption of Chinese companies listing in New York.
Under the new rules, the China Securities Regulatory Commission (CSRC) will vet any overseas listing applications, effective from March 31. The regulator has the power to block such IPOs, and the rules make clear listings must not endanger national security.
[ad_2]
[ad_1]
Oil giant
BP
announced Thursday it was acquiring
TravelCenters of America
one of the largest servicing centers offering truck repairs and maintenance services.
BP
(ticker: BP) will acquire
TravelCenters of America
(TA) for $86 a share, representing an 84% premium to the average trading price of TravelCenters for the 30 days ended Wednesday. Total equity value of the deal was roughly $1.3 billion.
[ad_2]
[ad_1]
Berkshire Hathaway
investors may soon get a read on one of the company’s better deals in the past decade—a 2017 purchase for nearly $3 billion of a 38.6% interest in Pilot Flying J, the country’s leading operator of truck stops.
The Berkshire Hathaway (ticker: BRK/A, BRK/B) stake in the company will rise to 80% in the current quarter under the terms of the original agreement reached by CEO Warren Buffett with the founding Haslam family, which will retain the remaining 20% stake.
[ad_2]
[ad_1]
Bed Bath & Beyond Inc.’s Canadian division will shut down its stores under court protection after the company received an unusual lifeline earlier this week to save its U.S. operations from bankruptcy.
The troubled retailer filed its Canadian division for protection under the Companies’ Creditors Arrangement Act, Canada’s rough equivalent of chapter 11 bankruptcy. Bed Bath & Beyond has “reluctantly concluded” that even with the lifeline of its recent equity raise, there isn’t enough capital available both to restructure its U.S. business and bring the Canadian business to profitability, the company said in filings with an Ontario court.
[ad_2]
[ad_1]
This copy is for your personal, non-commercial use only. To order presentation-ready copies for distribution to your colleagues, clients or customers visit http://www.djreprints.com.
https://www.barrons.com/articles/ge-larry-culp-investors-annual-letter-83f4e20b
[ad_2]
[ad_1]
PepsiCo
beat earnings and revenue estimates in the fourth quarter, driven by higher prices. It increased its annual dividend, sending the stock higher in premarket trading Thursday.
The beverages and snacks giant (ticker:PEP) reported adjusted earnings per share (EPS) of $1.67 on sales of $28 billion. Analysts were expecting EPS of $1.65 on sales of $26.8 billion.
[ad_2]
