Silicon Valley Bank parent SVB Financial faces 'perfect storm,' analyst Dick Bove says - Silicon Valley Business Journal

SVB Financial Group, which has already seen its shares lose two-thirds of their value this year, faces more trouble ahead as Silicon Valley's recovery doesn't appear likely anytime soon.

"The perfect storm has now developed for the company," Bove of Odeon Capital Group told clients Oct. 28, saying that a fundamental change is underway as Silicon Valley companies may have to shift their focus from technology-based products and services for consumers to those designed for businesses. "We continue to see strength and momentum in our underlying business, despite persistent market challenges affecting liquidity flows to private companies, rising rates and fear of recession," Greg Becker, president and CEO of SVB Financial, said in releasing third-quarter results last month.

Bove, who has a"hold" rating on SVB, expects a moderate recession as the Fed continues to tighten. He expects the bank's low-cost deposits to fall as startups burn through their cash or transfer money into higher-yielding investments. More than half of SVB's deposits — 57% — don't earn interest, Bove said, adding that another hit could come from warrants the bank gets as part of its lending activities ultimately proving worthless.

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