$SIVB (SVB Financial Group) collapsed last week. As a result, we decided to aggressively de-risk the portfolio. All our US and European bank positions were sold on Friday, moving the majority of the portfolio into cash.

This was a risk control measure. We do not like to hold banks – which are risky companies and can lose 50%+ of their value in days – when there is even a slight chance of a banking crisis developing.

Even if no wider banking crisis develops, the collapse of $SIVB has negative implications for the profitability of the US banking industry. Depositors will move their deposits to the safety of US Treasury bills or from small to large banks. There will be more competition for deposits, and banks will earn less net interest income.

On the weekend, it was announced that a second US bank, $SBNY (Signature Bank), collapsed, and both its and Silicon Valley Bank’s depositors would be made whole.

The markets were not entirely reassured by this. Today European bank shares are down 6%, and US banks are under further pressure in pre-market trading. Selling the banks on Friday has significantly limited the portfolio’s losses today.

We hold a cautious near-term view on the market. The European index $EUSTX50 has broken down from a technical perspective and there are good fundamental reasons for the move. European banks have been a consensus long for many investors this year. Last week’s events could challenge that consensus.

The plan now is to monitor how the situation develops over the coming weeks, while holding plenty of cash or perhaps deploying some of it into defensive stocks in the Healthcare, Consumer Staples or Utilities sectors. We do not expect to buy back into banks before mid-April, when Q1 bank earnings start to come out and the damage to banks’ profitability can be assessed.

2023 performance YTD
@triangulacapital +9.0%
$SWDA.L +2.4%

Portfolio changes
Most of the banks and Energy companies in the portfolio were sold