Shares of SVB Financial Group were halted on Friday after tumbling 66% in premarket trading.
SVB, which does business as Silicon Valley Bank, was not immediately available for comment.
The brutal rout in the lender’s stock which began on Thursday spilled over into other U.S. and European banks as the episode spread concern about hidden risks in the sector and its vulnerability to the rising cost of money.
The S&P 500 banks index dropped 6.6% on Thursday and was set to open lower again on Friday.
Europe’s STOXX banking index fell more than 4%, set for its biggest one-day slide since early June, with declines for most major lenders, including HSBC, down 4.5%, and Deutsche Bank, down 7.9%.
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The crisis at SVB started earlier this week when the bank, which lends heavily to tech startups, launched a share sale to shore up its balance sheet after selling a portfolio consisting mostly of U.S. Treasuries at a loss. Sources familiar with the situation said on Thursday that some startups had advised their founders to pull out their money from SVB as a precautionary measure. The crisis underscored how rapidly rising interest rates had caused the price of such bonds to fall, feeding investor concerns that other banks might also be vulnerable. Earlier this month, the Federal Deposit Insurance Corp said U.S. banks faced a total of about $620 billion in unrealized losses on their securities holdings at the end of 2022.
But banking experts said SVB’s issues were unique and the worries about the broader sector were not warranted.
“The knee-jerk reaction in the market to this risk event looks overdone. But rising costs of deposits and possible deposit withdrawals are likely to pressure sector earnings,” Mark Haefele, Chief Investment Officer at UBS Global Wealth Management, wrote in a note.
