What kind of idiot would buy bank stocks when interest rates are rising? This happens over and over again throughout history. Banks fail during rising interest rates. Not only do they have fewer customers for their products, but their assets decline in value since investors would rather buy the new higher yielding bonds and mortgages than the low yield ones that the banks still have on their books. You want to buy bank stocks during the times of falling interest rates. In times of falling rates, banks have a boom of customers with refinances and new mortgages. Think of all the bank fees which are pure profit on each refinance. Plus, all the high interest rate loans they still have skyrocket in value as investors want them over new low interest rate loans.
I know KB was trying to argue here that banks would do well, with the assumption that they will give banking customers low interest rates on savings and then lend out at high interest rates. But that just isn't how most banks work. Most banks can't keep on to the higher interest rate loans. They sell them off to Freddy Mac and Fanny Mae. That is even if they do have any loans to sell as there are so few customers wanting the higher rate loans.
I've spent 33 years in consumer and commercial banking. You are supposed to manage rate risk with short term duration bonds (90 day), hedges, etc.
This is money you have to have ready on demand for withdrawal requests.
If you watch the video posted by Biostud above, it provides one reason why SVB failed (besides a concentrated customer base of tech startups vs mom and pop depositors):
They mentioned two types of holdings to invest customer deposits -
1)
Bonds held for sale which are marked to market quarterly (they were forced to liquidate at a loss because the mix held longer term bonds which lost too much value)
2)
Bonds held for investment which are longer term and kept on the books at face value until paid back in full.
The bank liquidated all the bonds held for sale and effectively lost over $1 billion in customer money. They had to raise capital to cover the loss. Unfortunately nobody came forth to buy the securities.
Overnight, people with millions of dollars at the bank realized they needed to get all their money out before everyone else causing a bank run. Now the bank was really screwed because they would have to liquidate all their bond holdings at a big loss.
The regulators knew that with no new capital and not enough money to cover all deposits (thank fractional reserve banking), THE BANK WAS TOAST. So they shut it down during working hours which is unheard of. They usually get shut down over a weekend.