More SVB-Like Crises To Come For US Banking System, Aswath Damodaran Predicts

Aswath Damodaran, an economic analyst and valuation guru, believes that more Silicon Valley Bank (SVB)-style disasters are on the horizon in the United States.

The recent banking crisis in the United States, which began with the repercussions of the SVB, posed a significant threat to the American economy. The crises also posed a threat to other countries financial sectors.

Damodaran stated in his blog that the US may see more dominoes like the SVB.

“More dominoes are waiting to fall in the US banking industry,” writes the New York University professor on his blog.

Drifting “easy comes, easy goes,” Damodaran went on to explain that the banks that have witnessed the fastest deposit growth over the previous five years have also seen the greatest market cap decrease.

“When banks are broken down based on deposit growth over the last five years, it is clear that the market cap loss has been greatest at the banks with the highest deposit growth.”

Along with discussing how banks work, he touched on the causes that led to the failure of “too large to fail” banks in his blog.

He also distinguished between the current banking crisis and prior ones.

The SVB-led crisis, he claims, “looks like a slow-motion car wreck” but lacks the “systemic consequences of previous crises.”

He believes the current and future banking crises will redistribute wealth rather than impose expenses for the rest of the population.