Depositors Money is the SAFEST in SVB banks compared to other USA banks.

 

15^th March 2023

Depositors Money is the SAFEST in SVB banks compared to other USA banks.

Dear Fellow Investors,

Namaste! Business situations are changing fast. As Bill Gates used to say – business at the speed of thought. My major call for 2023 was in one line – people will be misguided and they will miss once in a life time opportunity to make tons of money. Look at the case of SVB banks in the USA. They created the panic and panic, nobody was ready to explain the reality of the problem in easy to understand manner to the normal investors. They created panic, brought down the stock and yesterday – all the bank stocks were on fire.

What is the exact problem of SVB bank?

Bank losses when the money they landed do not come back. We have seen in India – how Indian Banks have lost tons of money in the last 8 years under IBC and NCLT schemes. It was the real loss of the depositor’s money in India. It’s another matter that no MEDIA house has taken the matter seriously.

Let us go back to SVB.

SVB banks has tons of deposits – about 200% more than the lending. Thanks to COVID – they had tons of deposits in 2020 and could not lend. So they parked the money into GOVERNMENT securities. As of December 2022, they had deposits worth USD 173 billion and landing worth USD 74 billion only. Speed of deposits were more compared to the speed of loans. So, they had parked USD 117 bln into fixed income securities largely – treasuries and mortgaged backed securities.  

From March 2022 – FED started raising the rates. In the case of bonds and securities the price is inversely related to the interest rates. It means – when the rate of interest goes up the prices of bonds come down and when the interest rates goes down the prices of bonds moves up.

So, the prices of their securities fell. FED rate was 0.25% in March 2022. It increased consistently to 4.75% now. It means the interest rates have gone up by 1800% or 18 times. For example – let us say you have USD 100 bond at .25% interest maturing after 10 years. Now the current rate is 4.75%. so, the bond value is around USD 95.50, instead of USD100.25 in case, the interest rate had remained the same.

As per the ECONOMIST – the bank sold all the liquid bond portfolio and took the loss of USD 1.8 bln. To fill up the gap – they declared to raise USD 1.75 bln through fresh shares sale. But this news was taken negatively and panic was created.

Understand this point with simple example – say you have opened an FD at 6% in March 2020 for 5 years. Now the FD rate is 7.50%. If you break the old and convert into the new fd – the bank will give you the interest at the rate of 5% (3 years rate at the time of 2020) minus penal interest of 1%. So, you will get 4% instead of 6%.

Rs.1 lakh would have grown into Rs.1.18 lakh in 3 years. But since you broke it – the bank gave you Rs.1.12 lakhs only. You lost Rs.6000. Something like this has happened in SVB BANK. SVB lost because the interest rates have gone up 1800%. But if the bank keep the securities till the maturity – they will have not loss at all. In the above example – you keep the FD of 6% on and wait for 2 more years – the bank will give you Rs.1.30 lakhs back. No losses to you too.

What is the scenario of USA banking as whole?

This is the collective scenario in the USA. As per NOURIEL ROUBINI – US banks have USD 620 billion of unrealised losses (due to interest rate hike). Their capital is USD 2.2 Trillion. This is about 28% of their equity. 

This means the FED may not increase the rates at faster pace now or reduce the rates in reality. This will be a big news of TEJI. 

Why SVB is the SAFEST BANK as of now?

The FED has given assurance to all the depositors of SVB banks that their deposits are safe. For other banks they have not said the same thing so far. So, BANK OF AMERICA may be too big to fail – but they have not declared their losses yet and fed has not said something about it or any other banks so far.

What is GURU MANTRA if you want to make money in 2023?

We have seen two panics in the recent past. Adani in January and early February and now USA banks.

Adani bounced back nicely from the lows and USA BANKS also moved up yesterday.

Those who understood the reality of crises fast and took action – they made fast and big money.

The ADVANTAGE of being with HITESH PARIKH: -

We take pains to study the issues in details without getting panicked. Once we study – WE KNOW exactly what is the right investment opportunity and what is not right. We don’t have to rely on MEDIA opinions or so called expert’s view. WE KNOW. Real knowledge is the real power.

If you really want the correct guidance (and not misguidance)- take advantage of our skill set and make tons of money in the coming financial year without fail.

Wish you all the best.

Follow me on Twitter @hiteshmparikh /  WhatsApp - +91-9869425399.

Learn a Lesson. Live with Passion & Invest with Reason.

 

Hitesh Parikh.