Bank stocks have been the talk of Wall Street for the better part of a month. Now, the upcoming Silicon Valley Bank auction may be telling for the future of the sector.
What do you need to know about the pending SVB auction?
Well, after being unable to find a buyer for the failed bank, the Federal Deposit Insurance Corporation (FDIC) decided to put the lender’s assets up for public auction. The FDIC has opted to separate the bank’s two major properties, Silicon Valley Private Bank and Silicon Valley Bridge Bank.
While the time to put in a bid for the private bank should have expired at 8:00 pm Eastern on March 22, the FDIC announced yesterday that it will extend the deadline to bid on the the private bank until Friday, March 24, alongside the bridge bank.
Interestingly, this is the second extension of the original auction timeline. Indeed, the FDIC apparently faced a plethora of interest from potential buyers, either for the entirety of SVB or for deposits or assets. As such, on March 20, the regulatory agency opted to push back its auction deadline to reap the most from the belly-up bank.
The FDIC stated the following earlier this week:
“There has been substantial interest from multiple parties, and the FDIC and the bidders need more time to explore all options in order to maximize value and achieve an optimal outcome.”
Silicon Valley Private Bank is a sort of follow-up to Boston Private, a wealth-management centric bank that SVB acquired in 2021. Meanwhile, the bridge bank was created by the FDIC as a sort of temporary safe haven for SVB’s assets and liabilities.
The FDIC initially tried to sell both properties together last weekend, before taking its current route.
Bank Stocks Shaky Ahead of SVB Auction Deadline
Anyone who has been watching Wall Street knows that bank stocks have been on something of a bumpy road in the wake of the regional banking crisis. Indeed, financial institutions ranging from Bank of America (NYSE:BAC) to Robinhood (NASDAQ:HOOD) have been falling in share price as the entire banking sector experiences regulatory scrutiny. The Nasdaq Bank Index is down more than 25% in just the past month on the SVB pandemonium.
The entire crisis is essentially a function of balance sheet concerns stemming from a questionable portfolio sale. Specifically, SVB sold a portfolio of Treasuries and mortgage-backed securities to Goldman Sachs (NYSE:GS) at a hefty $1.8 billion loss. This sparked balance sheet concerns that essentially manifested bank runs across both SVB and other potentially at-risk regional banks.
“At the end of day they were a community bank at the right place at the right time,” said Patrick Dwyer, a former Wealth Manager for Boston Private before its sale to SVB, “Grew like crazy and probably needed a more sophisticated leadership team as the business got larger and more complex.”
The sale of the bank’s assets may help ease concerns surrounding the bank sector. In that regard, there remain some prime potential buyers.
First Citizens BancShares (NASDAQ:FCNCA) is apparently hoping to purchase all of SVB, according to Bloomberg. Should that succeed, it could be a strong sign that the current banking crisis is more hot air than smoke.
On the date of publication, Shrey Dua did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.