Silicon Valley Bank’s (SVB) collapse is not a systemic issue, according to Liberum, which remains confident in the fintech space and believes there is a “huge opportunity” happening right now.
Analysts at the investment bank note that the main takeaway from the event which has transpired over the last five days is that the risks from tightening monetary policy and slowing economic growth are “beginning to crystallise.”
The broker notes that for banks and FinTechs, risks to profitability may arise as Net Interest Margins (NIMs) are squeezed because of increased competition and costs of deposits.
Those most at risk are the neo-banks, such as payment and money transfer companies, which hold large customer deposits.
Additionally, FinTechs which banked with SVB could lose potentially some or all of their deposits, at least on a temporary basis as regulators implement deposit insurance schemes, said the broker.
For banks, it is a similar issue, with Liberum noting that the increasing cost of deposits means the initial success banks had in keeping rates low will be harder to maintain, resulting in NIMs being squeezed.
However, European banks “tend to be more diversified” than their US counterparts, which means loan books and deposit bases are less dependent on single industries or geographies.