Fears grow for challenger banks as their lenders feel the pain of SVB’s collapse
Some of the UK’s leading tech companies were hit yesterday as their backers felt the pain of the collapse of Silicon Valley Bank (SVB).
Molten Ventures, a FTSE 250 investment firm that has banking app Revolut – founded by Nikolay Storonsky – in its portfolio, saw its shares fall 3.8%, or 12p, to 303.6p after a steep fall Friday when the crisis started.
Another of Molten’s investments is customer review website Trustpilot, which revealed that SVB was its “main banking partner” and held around £20m in cash with the bank’s UK subsidiary.
Fall: FTSE 250 investment firm Molten Ventures, which has banking app Revolut – founded by Nikolay Storonsky (pictured) – in its portfolio, saw its shares fall 3.8%
The falls have raised new question marks over how these companies are funded. Fellow tech-focused investor Chrysalis Investments fell 2.5%, or 1.5p, to 59.2p amid contagion fears spreading through the market.
The company’s portfolio includes money transfer group Wise, which itself fell 11.4%, or 66p, to 515p, as well as challenger bank Starling and buy now and later group Klarna .
Another Chrysalis investment, Secret Escapes, has also bet on SVB.
Meanwhile, asset manager Columbia Threadneedle was hit as its £1.5bn Responsible Global Equity fund held around 97,000 SVB shares while its largest £4.8bn F&C investment trust sterling held around 46,000. Shares in the latter fell 1.8%, or 17p, to 917p in London.
Will Marwick, chief executive of payments firm IFX, said the collapse of SVB and the market turmoil it triggered would put “renewed emphasis” on the stability of the fintech sector.
“The number of fintechs exposed to SVB underscores the need for clients to regularly investigate the diversification of their operations across different banking partners through their provider and to ensure that robust systems and risk controls are in place” , he added.
Meanwhile, John Colley, associate dean at Warwick Business School, said the fall of SVB would be “a concern” for the industry and that any bank serving tech start-ups was likely to “raise concerns among depositors”.
He added that if the UK and US governments had helped save SVB, they could “draw the line there” by putting other banks in niche sectors at risk.
“So far the banks have escaped a run, but that may not remain the case for long,” Colley said.
SVB’s collapse sent shockwaves throughout the global financial system as investors feared the crisis that tore down the California-based company could spread.
SVB had invested heavily in US government bonds which, while generally safe investments, saw their value plunge as interest rates rose, forcing the company to try to raise funds and raising concerns about its stability and that of other banks.
Officials on both sides of the Atlantic moved quickly to contain the crisis, with US regulators taking control of SVB on Friday after it collapsed, the biggest US bank failure since the 2008 financial crisis.
