*
Deposits drop faster than forecast - SVB
*
Capital raise, PE injection, asset restructure to help
*
Stock drops 30% after hours
(Updates shares)
March 9 (Reuters) - Startup-focused lender SVB Financial
Group is selling assets and has embarked on a $1.75
billion share sale to shore up its balance sheet after cutting
the 2023 forecast as rising interest rates weighed on the
company and its customers.
SVB's troubles are the latest example of strain in
rates-sensitive parts of the U.S. economy - coming just hours
after crypto-lender Silvergate said it was winding down
operations late on Wednesday.
Shares in the California-based parent of Silicon Valley Bank
dropped nearly 30% in premarket trading on Thursday.
SVB loans money to early-stage businesses and says it banked nearly half of U.S. venture-backed technology and life-sciences companies with stock market listings in 2022. Its customers' "cash burn" rose in February and is driving deposits lower than forecast, CEO Greg Becker said in a letter to investors. Combined with higher costs of capital, that is pressuring margins and income, he said.
In response, SVB said it is seeking to raise more than $2
billion, made up of $500 million from private equity firm
General Atlantic and $1.75 billion via a public equity offering.
General Atlantic was not immediately available for comment
outside normal business hours.
The company also liquidated most of its securities
portfolio, raising $21 billion, which it plans to re-invest in
shorter-term debt while doubling its term borrowing to $30
billion.
"We are taking these actions because we expect continued
higher interest rates, pressured public and private markets, and
elevated cash burn levels from our clients," Becker said.
"When we see a return to balance between venture investment
and cash burn – we will be well positioned to accelerate growth
and profitability," he added, noting SVB is "well capitalised".
SVB also published updated outlook estimates, and forecasts
a "mid thirties" percentage drop in net interest income this
year - larger than the "high teens" drop it forecast seven weeks
earlier.
It now projects the fall in net interest margins this
year to ease to 1.45-1.55% from its January forecast for
1.75-1.85%.
(Reporting by Ananya Mariam Rajesh in Bengaluru and Tom
Westbrook in Sydney; Editing by Krishna Chandra Eluri, Jane
Merriman and Dhanya Ann Thoppil)
