Here is the big difference between FRC and Silicon Valley.. Silicon Valley was gambling with depositors money as we all understand that banks do! Silicon Valley did not hedge themselves, they did not have a risk manager that was making sure that the bank was acting responsibly, and people were kind of just running rampant with everyone's money! This is a huge problem with banks like Silicon Valley! FRC isn't exactly in this position! There has not been any suggested news that FRC is actually insolvent because of any type of gambling debts! This actually puts FRC in a completely, and totally different situation! If Silicon Valley goes bust, despite it being one of the largest banks in America.. its surely because of their irresponsibility! The FED, FDIC, and congress are far more likely to let the bank fail because they acted irresponsibly for 1, & 2.. the deposits that they had lost belonged to some of the biggest tech and growth companies in the United States most of which were freshly minted! Also alot of them were zombie companies with little to zero real world value! FRC is more of a classic depositor bank for savings, and loans along with some business loans! FRC is not in the same situation as SVB! There is nothing to indicate that they were actually gambling quite the way that Silicon Valley was despite the fact that they often served similar customers! FRC seems much more diversified!
Below are the balance sheets from both banks! There are a few things that suggest what is currently going on here, and bottom line.. this is what is important!
The value of the balance sheet of First Republic Bank is pretty much dependent on what kind of assets they have which is mostly going to be made up of net loans, since this is a bank that primarily services loans! As I have highlighted, all of these values represent millions of dollars.
FRC: 18.7 Billion in Commercial Industrial Loans 137 Billion in Real Estate Mortgage Loans These are two of the 3 areas that they derive the much of their value since they are a bank! Majority of its assets are held in State and Municipal Securities! Majority of their loans are parked in Real Estate loans themselves! Likely supplying these mortgage loans to consumers, and then passing those on to Freddie Mac & Fannie Mae in order to receive a cash dividend instead! Massive drop in stock value likely based on "Contagion" fears! FED, as well as JP Morgan has since backed them with additional liquidity that totals more than double their entire MBS Balance Sheet! Capable of sustaining ANY possible future run on their bank! "Contagion" completely locked down - ie.. yallah goodbye to any short-thesis!
SVB: -Held the majority of it's loans in much riskier assets! By comparison Silicon Valleys value mostly came from Commercial & Industrial loans! This is where all of their assets are derived from, as well as "Hedged" so to speak! That being said.. their money is much higher risk because it is out in the open markets where it is exposed to much greater volatility! Their Real Estate investments make up a much smaller portion of their assets! Additionally, of all of their assets, their largest block of investments were being held in Mortgage Backed Securities! Mortgage Backed Securities have taken some of the biggest overall hits in the market since 2022! All throughout 22' MBS were plummeting in value the entire time! TRADITIONALLY MBS are typically a safer asset for a bank... NOT in 22 though! This is where all of their gambling was happening for the most part! (Buying bad, mixed-baskets of debt!) Same problem that caused 2008 financial crisis!
Valuation metrics used to gauge whether a stock may be oversold include a company’s price-to-earnings ratio and book value. Both measures have well-established historical norms for the broad markets and for specific industries. When companies slip well below these historical averages for superficial or systemic reasons, smart investors smell an opportunity to double their money.
📈🦈Being contrarian means that one is going against the prevailing trend. Therefore, it requires a greater degree of risk tolerance and a substantial amount of due diligence and research. As such, a contrarian strategy is best left to very experienced investors and is not recommended for a conservative or inexperienced investor. -NOT financial advice, trade at your own risk tolerance!
SOMNIOHM
Here is the big difference between FRC and Silicon Valley..
Silicon Valley was gambling with depositors money as we all understand that banks do!
Silicon Valley did not hedge themselves, they did not have a risk manager that was making sure that the bank was acting responsibly, and people were kind of just running rampant with everyone's money!
This is a huge problem with banks like Silicon Valley!
FRC isn't exactly in this position!
There has not been any suggested news that FRC is actually insolvent because of any type of gambling debts!
This actually puts FRC in a completely, and totally different situation!
If Silicon Valley goes bust, despite it being one of the largest banks in America.. its surely because of their irresponsibility! The FED, FDIC, and congress are far more likely to let the bank fail because they acted irresponsibly for 1, & 2.. the deposits that they had lost belonged to some of the biggest tech and growth companies in the United States most of which were freshly minted!
Also alot of them were zombie companies with little to zero real world value!
FRC is more of a classic depositor bank for savings, and loans along with some business loans!
FRC is not in the same situation as SVB! There is nothing to indicate that they were actually gambling quite the way that Silicon Valley was despite the fact that they often served similar customers!
FRC seems much more diversified!
Below are the balance sheets from both banks!
There are a few things that suggest what is currently going on here, and bottom line.. this is what is important!
The value of the balance sheet of First Republic Bank is pretty much dependent on what kind of assets they have which is mostly going to be made up of net loans, since this is a bank that primarily services loans!
As I have highlighted, all of these values represent millions of dollars.
FRC:
18.7 Billion in Commercial Industrial Loans
137 Billion in Real Estate Mortgage Loans
These are two of the 3 areas that they derive the much of their value since they are a bank!
Majority of its assets are held in State and Municipal Securities!
Majority of their loans are parked in Real Estate loans themselves!
Likely supplying these mortgage loans to consumers, and then passing those on to Freddie Mac & Fannie Mae in order to receive a cash dividend instead!
Massive drop in stock value likely based on "Contagion" fears!
FED, as well as JP Morgan has since backed them with additional liquidity that totals more than double their entire MBS Balance Sheet! Capable of sustaining ANY possible future run on their bank!
"Contagion" completely locked down - ie.. yallah goodbye to any short-thesis!
SVB:
-Held the majority of it's loans in much riskier assets!
By comparison Silicon Valleys value mostly came from Commercial & Industrial loans!
This is where all of their assets are derived from, as well as "Hedged" so to speak!
That being said.. their money is much higher risk because it is out in the open markets where it is exposed to much greater volatility!
Their Real Estate investments make up a much smaller portion of their assets!
Additionally, of all of their assets, their largest block of investments were being held in Mortgage Backed Securities!
Mortgage Backed Securities have taken some of the biggest overall hits in the market since 2022!
All throughout 22' MBS were plummeting in value the entire time!
TRADITIONALLY MBS are typically a safer asset for a bank... NOT in 22 though!
This is where all of their gambling was happening for the most part!
(Buying bad, mixed-baskets of debt!)
Same problem that caused 2008 financial crisis!
Valuation metrics used to gauge whether a stock may be oversold include a company’s price-to-earnings ratio and book value. Both measures have well-established historical norms for the broad markets and for specific industries. When companies slip well below these historical averages for superficial or systemic reasons, smart investors smell an opportunity to double their money.
📈🦈Being contrarian means that one is going against the prevailing trend.
Therefore, it requires a greater degree of risk tolerance and a substantial amount of due diligence and research. As such, a contrarian strategy is best left to very experienced investors and is not recommended for a conservative or inexperienced investor.
-NOT financial advice, trade at your own risk tolerance!
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2 years ago (edited) | [YT] | 8