March 13th, 2023 | 13:10 CET
Bank quake? Our assessment! SVB Financial, Credit Suisse, Aspermont
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At home in Southern Germany, the passionate stock exchange expert has been accompanying the capital markets for about twenty years. With a soft spot for smaller companies, he is constantly on the lookout for exciting investment stories.
SVB Financial: Authorities react, but what does SVB UK do?
On Friday morning US time, a hastily sought capital increase to provide SVB Financial with new funds failed. For days, the Silicon Valley bank, which primarily finances growth companies, is believed to have been exploring new options for rescue. A takeover by another financial institution is also open to debate. SVB is one of the twenty largest financial institutions in the US, according to industry experts. Partly because of this, the bank's troubles infected the markets last week, dragging down bank stocks in particular. Meanwhile, authorities in the US seized the bank's deposits and wound up the institution. Investors will get their money back next week. At the same time, observers are eyeing the British offshoot SVB UK. Authorities in the UK also announced over the weekend that they would take action to prevent contagion effects.
However, it is unlikely that the current situation is the beginning of a new financial crisis that began in 2007 with the collapse of hedge funds and culminated in the collapse of Lehman Brothers and numerous billion-dollar rescues of banks around the globe. First, SVB operates as a partner to growth companies in a niche particularly burdened by rising interest rates. Second, thanks to stricter regulatory requirements, banks are much more solidly positioned today than in 2007. In addition, managing the interest rate risks of bond portfolios is part of everyday life for banks. In the case of SVB, the interplay of several events likely caused the distress.
Credit Suisse: Problem child now in focus
The fact that rising interest rates can also cause problems for banks was already demonstrated last year by the example of Credit Suisse. The Swiss bank posted losses in the billions. Weak ratings are putting a strain on the investment banking business, which is doing well, and are scaring off wealthy clients who traditionally like investing in Switzerland. The starting point for Credit Suisse's misery was business with the supply chain financier Greensill and the hedge fund Archegos, which has since slid into bankruptcy. The Swiss bet too big on both collaborations and ultimately lost - which does not cast a positive light on Credit Suisse's risk management. At the end of last week, Credit Suisse also postponed its financial results - the US securities regulator pointed out unresolved issues with its accounting to the bankers. It is no wonder that investors are putting one and one together in the mirror of SVB's difficulties in the US: the share has lost more than 60% within a year and is currently trading at its low for the year.
Even if SVB's difficulties do not directly affect banks in general, caution in the interbank business is increasing. Credit Suisse was already a problem child before last week. The future is likely to be challenging for the Swiss. Due to poor market conditions, some business, such as investment banking, could slip through Credit Suisse's fingers. The bank will soon be moving out of the "Zurich Main Tower" skyscrapers in the Oerlikon district - it is quite possible that this will not be the only downfall for Credit Suisse. Since the events surrounding SVB, problem banks will likely have a difficult time. It is likely that there will be consolidation in the industry in the coming weeks and that problem banks will be taken over by market companions.
Aspermont: Corporate financing without risks
While business with growth companies is becoming increasingly unattractive for banks and the turnaround in interest rates may have explosive effects in addition to positive consequences for the lending business, depending on the framework conditions of the individual banks, innovative fintech companies that do not take risks on their own books with their business could benefit. The global media company Aspermont sees itself as a specialist for content related to commodities, mining, energy and agricultural products. Almost every industrial company, as well as representatives from the production of raw materials, will probably have come into contact with publications from Aspermont at some time or another. Among others, the two traditional brands, Mining Journal and Mining Magazine, belong to the Company, which has consistently digitized its business with specialized media content in recent years.
Virtually off the balance sheet, Aspermont launched a project last year that has what it takes to profit in the medium term as more and more banks pull back from financing growth companies. Aspermont and partners launched Blu Horseshoe, an intermediary platform for corporate financing that has already exceeded its goals in its first three months of operation. "We operate Blu Horseshoe as a majority shareholder together with renowned partners and see it as a test balloon of how well and effectively we can launch a new business using our existing resources. There are several potential additional Blu Horseshoes in our vision right now - for example, in e-learning," Alex Kent, managing director at Aspermont, said in an interview a few weeks ago. The main business for Aspermont continues to be in media content as well as being a specialized marketing agency.
If the air becomes increasingly thin for banks, riskier business areas and startup projects will likely suffer. A profiteer could be Aspermont, which already operates a financing platform for growth companies in Australia. Since Aspermont has long been internationally positioned with its global offices, other regions could become worthwhile targets. The stock is also considered extremely conservative: the valuation is low, and the main media content business has been growing steadily for 26 quarters - each year, Aspermont's media business is up 17%. Banks, on the other hand, will have to say goodbye to such growth figures for the time being - as long as they are not partners of Aspermont. The industry is under more pressure than ever since the euro crisis in 2011.
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