Finance
SVB collapse: Will 2008 Financial crisis repeat? Here’s what experts say
Billionaire hedge fund supervisor Invoice Ackman has in contrast the autumn of SVB to “bear Stearns”–the first financial institution to break down at first of the 2007-2008 world monetary disaster.
Taking to Twitter, Ackman wrote, “The chance of failure and deposit losses right here is that the following, least well-capitalised financial institution faces a run and fails, and the dominoes proceed to fall”.
Nevertheless, some analysts suppose that the SVB collapse is extra company-specific for now. Joe Biden administration has additionally argued that safeguards enacted after the 2008 monetary disaster would defend the nation’s financial system amid the shuttering of Silicon Valley Financial institution.
US Treasury Secretary Janet Yellen has expressed full confidence in banking regulators to take applicable actions in response and famous that the banking system stays resilient and regulators have efficient instruments to deal with any such occasion.
Indian-American Vivek Ramaswamy who’s working for the 2024 US Presidential ballot questioned whether or not SVB used ESG elements to cost its loans, and in contrast the “key trigger” of the 2008 monetary disaster. In a video message, Ramaswamy wrote, “A key explanation for the 2008 monetary disaster was using social elements to make loans (again then, fostering house possession). After we don’t study classes, historical past repeats itself: did Silicon Valley Financial institution use ESG elements to cost its loans? Roll that log over & see what crawls out”.
US Monetary commentator Robert Armstrong in his newest opinion piece mentioned that “SVB’s collapse isn’t a harbinger of one other 2008”.
Armstrong in Monetary Occasions wrote that “The chance of contagion throughout the banking system seems to be restricted. However on the finish of each central financial institution rate-increase cycle,there comes a part the place issues within the monetary system start to interrupt. These breakages, minor or main, erode the arrogance of traders and customers, rising the chances of recessions. The failure of SVB doesn’t herald one other 2008, however it does mark the start of the breakage part”.
The chance of contagion throughout the banking system seems to be restricted. However on the finish of each central financial institution rate-increase cycle, there comes a part the place issues within the monetary system start to interrupt. These breakages, minor or main, erode the arrogance of traders and customers, rising the chances of recessions. The failure of SVB doesn’t herald one other 2008, however it does mark the start of the breakage part”.
Economist Stephanie Pomboy advised FOX NEWS, “we’re getting ready to a 2008-style monetary disaster and I am not attempting to be hyperbolic… We have got some main penalties coming at us, and I believe it should devolve very quickly due to all of the leverage”.
Mike Mayo, Wells Fargo senior financial institution analyst advised cnn.com, mentioned the SVB disaster may very well be “an idiosyncratic scenario.”
“That is evening and day versus the worldwide monetary disaster from 15 years in the past,” he advised CNN’s Julia Chatterly on Friday. Again then, he mentioned, “banks have been taking extreme dangers, and other people thought every part was effective. Now everybody’s involved, however beneath the floor, the banks are extra resilient than they’ve been in a era.”
What was the 2007-2008 monetary disaster?
In 2007, the most important monetary disaster because the Nice Melancholy rippled throughout the globe after mortgage-backed securities tied to ill-advised housing loans collapsed in worth. The panic on Wall Road led to the demise of Lehman Brothers, a agency based in 1847. As a result of main banks had intensive publicity to 1 one other, the disaster led to a cascading breakdown within the world monetary system, placing tens of millions out of labor.
How did SVB’s disaster occur?
The decline of Silicon Valley Financial institution partly stems from the Federal Reserve’s aggressive rate of interest hikes over the previous yr.
When US Fed charges have been close to zero, banks loaded up on long-dated, seemingly low-risk treasuries. And with the incessant rise of the US Fed hike since 2022 to combat in opposition to inflation, the worth of these belongings has decreased, leaving banks sitting on a pile of unrealised losses.
The high-interest charges hit the tech startups principally, in accordance with Moody’s report. That prompted a number of tech companies to attract down the deposits that they held at SVB to fund their operation.
Moreover, with the hike in charges, the worth of treasuries, in addition to different securities additionally lowered.
As larger rates of interest brought about the marketplace for preliminary public choices to close down for a lot of startups and made personal fundraising extra pricey, some Silicon Valley Financial institution purchasers began pulling cash out to fulfill their liquidity wants. This culminated in Silicon Valley Financial institution on the lookout for methods this week to fulfill its prospects’ withdrawals. The SVB bought a $21 billion bond portfolio.
SVB introduced on Thursday it might promote $2.25 billion in frequent fairness and most popular convertible inventory to fill its funding gap. Some SVB purchasers pulled their cash from the financial institution on the recommendation of enterprise capital companies similar to Peter Thiel’s Future Fund.
This spooked traders similar to Normal Atlantic that SVB had lined up for the inventory sale, and the capital elevating effort collapsed late on Thursday.
About Silicon Valley Financial institution (SVB)
Based in 1983, SVB supplied financing for nearly half of US venture-backed know-how and healthcare corporations. It’s America’s Sixteenth-largest financial institution and was not too long ago ranked “America’s Finest financial institution” on Forbes 2023 checklist. FSB acquired this title from Forbes for fifth consecutive yr.
The financial institution served principally know-how employees and enterprise capital-backed corporations, together with a few of the trade’s best-known manufacturers.
Almost half of the US know-how and healthcare corporations that went public final yr after getting early funding from enterprise capital companies have been Silicon Valley Financial institution prospects, in accordance with the financial institution’s web site.
The financial institution additionally boasted of its connections to main tech corporations similar to Shopify, ZipRecruiter, and one of many prime enterprise capital companies, Andreesson Horowitz.
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Is the dragon slain? Or just wounded?
Inflation has been the scourge of the economy for the last three years. It spiked from a benign 1.4% when President Biden took office in 2021 to a searing 9% some 18 months later. The Federal Reserve took aim with speedy interest rate hikes, and it seemed to work. By September, inflation was down to 2.4%, almost in the normal zone.
Then, an upward blip. The latest data shows inflation ticked back up to 2.6% in October. That could be a spot on the X-ray that turns out to be nothing. Or it could signal that inflation is making a comeback, which would scramble the outlook for interest rates, financial markets, and the policies of the incoming Trump administration.
The inflation uptick in October wasn’t a fluke based on hurricanes or other one-time anomalies. Most important goods and services categories rose, including food, energy, rent, and vehicles. This came one month after the Fed basically declared victory over inflation. In September, the Fed reversed monetary policy and started cutting interest rates, signaling that the time had come to worry more about keeping growth humming than about getting prices down.
The Fed is staying the course for now. It cut short-term rates again on Nov. 14 and may do so again at its next policy meeting in December. But the odds of more rate cuts are dropping, with policymakers waiting for more lab results in the form of forthcoming inflation data.
“Inflation might soon be front-page news again,” Capital Economics announced in a Nov. 13 analysis. The forecasting firm argues that the currently inflationary trend is OK, but the future outlook is more worrisome — in large part because of what Donald Trump plans to do once he takes office next January.
At least two elements of Trump’s agenda are inflationary: new tariffs on imports and the mass deportation of undocumented migrants. Tariffs are taxes that raise the cost of imported goods directly. Deporting migrants would reduce the size of the labor force, especially targeting lower-wage workers. Replacing them with workers who might demand higher pay — or with costly machines — would raise costs one way or another, with producers passing as much as they could on to consumers.
A third inflation concern is Trump’s desire to cut taxes further, which can have a stimulus effect by putting more money in people’s pockets, boosting spending and demand and sometimes leading to higher prices.
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“Given all that President-elect Trump has promised to do quickly — such as hike tariffs, cut taxes further and slash immigration — one can easily foresee a re-acceleration of inflation next year,” Bernard Baumohl, chief global economist at Economic Outlook Group, wrote on Nov. 13. “The Federal Reserve is now in a real quandary.”
Finance
Vallourec SA (VLOUF) Q3 2024 Earnings Call Highlights: Strategic Moves and Financial Resilience …
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EBITDA Margin: Maintained a healthy margin similar to previous quarters.
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Full Year EBITDA Outlook: Reiterated at EUR800 million to EUR850 million.
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Cash Generation: EUR130 million in Q3, reducing net debt for the eighth consecutive quarter.
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Net Debt Reduction: Over EUR1.2 billion reduction since 2022.
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Q3 Group EBITDA Margin: Close to 19%.
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Tubes Volumes: Reduced to 292 kilotons in Q3.
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Mine & Forest Segment EBITDA: Expected slightly below EUR100 million for the full year.
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Net Debt Reduction in Q3: EUR124 million.
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Full Year Mine Production Expectation: Approximately 5 million tonnes, down from 6 million tonnes.
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Q3 Cash Flow: Total cash generation of EUR130 million.
Release Date: November 15, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
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Vallourec SA (VLOUF) maintained a healthy EBITDA margin in Q3 2024, driven by strong international OCTG market performance.
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The company generated significant cash flow, reducing net debt for the eighth consecutive quarter, totaling a reduction of over EUR1.2 billion since 2022.
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Vallourec SA (VLOUF) announced its first strategic acquisition in nearly a decade with Thermotite do Brasil, enhancing its position in the offshore line pipe market.
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The company is progressing well with its optimization program in Brazil, which is expected to significantly contribute to closing the profitability gap.
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Vallourec SA (VLOUF) plans to announce a dividend proposal for its 2025 AGM, marking the first dividend in 10 years, reflecting strong financial health.
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The US OCTG market experienced softness, impacting Vallourec SA (VLOUF)’s overall performance.
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The global iron ore market softened in Q3, leading to lower prices and sales volumes in the Mine & Forest segment.
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Vallourec SA (VLOUF) lowered its full-year mine production expectations to approximately 5 million tonnes, down from 6 million tonnes.
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Q3 2024 saw a reduction in tonnage sold and a slight decrease in average realized prices, leading to a year-over-year decline in revenues and EBITDA.
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The company faces potential challenges from the new tax environment in France, which could impact shareholder remuneration strategies like share buybacks.
Q: Is a share buyback still an option for shareholder remuneration given the new tax environment in France? A: Philippe Guillemot, CEO: While we never exclude any ways to return excess cash to shareholders, the potential tax implications in France make share buybacks less attractive. We plan to return cash to shareholders with a payout ratio of 80% to 100%, starting from Q3. The dividend proposal will be announced in February, based on Q3 cash generation.
SHEPHERDSTOWN, W. Va., November 15, 2024–(BUSINESS WIRE)–JSB Financial Inc. (OTCPink: JFWV) reported net income of $2.0 million for the quarter ended September 30, 2024, representing an increase of $1.3 million when compared to $643 thousand for the quarter ended September 30, 2023. Basic and diluted earnings per common share were $7.64 and $2.33 for the third quarter of 2024 and 2023, respectively. The third quarter results include the recognition of an interest recovery totaling $1.3 million, a recovery to the allowance for credit losses on loans totaling $252 thousand and a recovery of legal fees totaling $17 thousand on prior nonperforming loans. Excluding the impact of these notable items, pre-tax income of $959 thousand for the third quarter of 2024 was $187 thousand more than the same period in 2023.
Net income for the nine months ended September 30, 2024 totaled $3.4 million, representing an increase of $1.1 million when compared to $2.3 million for the same period in 2023. Basic and diluted earnings per common share were $13.33 and $8.46 for the nine months ended September 30, 2024 and 2023, respectively. Annualized return on average assets and average equity for September 30, 2024 was 0.87% and 17.65%, respectively, and 0.66% and 13.17%, respectively, for September 30, 2023. Excluding the impact of the notable items in the third quarter of 2024, pre-tax income of $2.7 million for the nine months ended September 30, 2024 was $96 thousand lower than the same period in 2023.
“We are pleased with our performance for the third quarter, which includes one-time recoveries on nonperforming loans totaling $1.5 million. Additionally, our team continued to create, deepen and expand our customer relationships which resulted in an increase in total deposits of 10% when compared to the second quarter and 17% year-over-year,” said President and Chief Executive Officer, Cindy Kitner. “During the third quarter, we saw stable loan growth, which was funded through loan maturities and deposit growth, and we continue to have strong credit quality metrics including past dues, nonaccruals, charge offs and nonperforming loans, all of which remained at historically low levels.”
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