As US regulators seek a buyer for the remnants of SVB Financial Group, they’ll be working to find a home for sprawling commercial-banking operations, a wealth unit, an investment bank and a fund manager.
Silicon Valley Bank was seized by regulators on Friday amid a run on deposits and an aborted push to raise capital. The Federal Deposit Insurance Corp now aims to find buyers for the firm’s various businesses to return as much of clients’ money as possible.
Major banks are likely to at least explore purchasing SVB businesses given their manageable size and the attractive client base of tech firms and their wealthy founders. The bank was undone by piling into bonds just before rates rose and a concentrated depositor base, but had posted profits every year before its rapid downfall.
Still, the FDIC’s statement on Friday didn’t indicate a likely quick sale of the whole firm. The regulator said it would issue an advance dividend to uninsured depositors within the next week with future payments perhaps coming as asset sales occurred.
The bank held about $US212 billion (322 billion) in assets at year-end, a figure that has certainly shrunk since then as the firm sold holdings to raise cash and depositors pulled out their funds. More than half the bank’s assets were in a bond portfolio, a setup that brought losses when rates rose but should be relatively straightforward to offload.
The company had more than 8500 employees as of December 31, according to its annual filing. With dozens of offices around the world, the firm operates in the US and Canada, as well as the UK, Europe, Asia and the Middle East. The Bank of England said Friday it plans to declare the UK unit insolvent in a separate process.
Here’s a look at SVB’s operating segments:
Silicon Valley Bank
SVB’s commercial bank gained fame in California as the banker to private equity and venture capital firms, specialising in tech and healthcare clients. It reported a profit of $US3.4 billion for 2022, when it had around $US172 billion in deposits. Its $US5.23 billion in revenue was about 84 per cent of the firm’s total for 2022.
Most of the firm’s loans were to private equity and venture capital funds, and it specialised in capital call lines of credit. Those lines give VC firms the ability to tap cash to immediately invest in a startup, and then repay after it receives the money that pension funds and other investors have previously committed to put into their funds.
The investment bank touts its services to firms in industries including software, digital infrastructure, fintech, medical devices and biopharma. It advised on about $US9 billion in M&A transactions last year, ranking 83rd globally, Bloomberg league tables show. The unit had a loss of $US95 million in 2022 on revenue of about $US508 million.
The fund manager focuses primarily on venture capital investments and managed $US9.5 billion at the end of December. Its funds generate investment returns and management fees for SVB.
That unit suffered from the harsher environment for tech investing last year, posting a pretax loss of $180 million, compared to profits in 2021 and 2020.
SVB’s smallest unit by revenue, it includes high-net-worth clients picked up in the 2021 acquisition of Boston Private Financial Holdings. The business had $US17 billion in client assets, which would be a small addition for the giants that manage trillions.
The private bank and wealth manager offers conventional products like mortgages, lines of credit, and tax and trust services. Also the not-so conventional, such as vineyard development loans.