While US regulators are looking for a buyer for the remains of SVB Financial Groupthey will work to find a home for extensive commercial-banking operations, a wealth unit, an investment bank and a fund manager.
Silicon Valley Bank arrested by regulators on Friday amid a run on deposits and a stalled push to raise capital. The Federal Deposit Insurance Corp. now aims to find buyers for the company’s various businesses to return as much money to clients as possible.
Big banks are likely to at least explore buying SVB businesses because of their manageable size and attractive client base of tech companies and their wealthy founders. The bank was held back by piling into bonds before rates rose and a concentrated depositor base, but posted a profit every year before its rapid collapse.
However, the FDIC’s statement on Friday did not indicate a quick sale of the entire company. The regulator said it will issue an advance dividend to uninsured depositors within the next week with future payments likely to come as asset sales take place.
The bank had about $212 billion in assets at the end of the year, a number that has certainly declined since then as the company sold assets to raise cash and depositors pulled their funds. More than half of the bank’s assets are in a bond portfolio, a setup that carries losses when rates rise but should be relatively straightforward to offload.
The company had more than 8,500 employees as of Dec. 31, according to its annual filing. With multiple offices around the world, the company 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 its UK unit insolvent in a separate process.
Here’s an overview of SVB’s operational features:
Silicon Valley Bank
SVB’s commercial bank has earned a reputation in California as the banker to private equity and venture capital firms, specializing in tech and health-care clients. It reported revenue of $3.4 billion for 2022, when it has nearly $172 billion in deposits. Its $5.23 billion revenue is about 84% of the company’s total by 2022.
Most of the company’s loans are to private equity and venture capital funds, and it specializes in capital call lines of credit. Those lines give VC firms the ability to tap money to invest immediately in a startup, and then pay out after receiving the money previously promised to pension funds and other investors to put into their funds.
SVB Securities
The investment bank provides its services to companies in industries including software, digital infrastructure, fintech, medical devices and biopharma. It advised about $9 billion in M&A transactions last year, ranking 83rd globally, Bloomberg league tables show. The unit has a loss of $95 million in 2022 on revenue of around $508 million.
Capital of SVB
The fund manager focuses primarily on venture capital investments and managed $9.5 billion at the end of December. Its funds generate investment returns and management fees for SVB.
That unit suffered from a tougher environment for technology investment last year, posting a pretax loss of $180 million, compared to 2021 and 2020 earnings.
SVB Private
SVB’s smallest unit by revenue, it joins high-net-worth clients in the 2021 acquisition of Boston Private Financial Holdings. The business has $17 billion in client assets, which is a small addition for giants that manage trillions.
The private bank and wealth manager offers traditional products such as mortgages, lines of credit, and tax and trust services. Also less conventional, such as loans for the development of vineyards.
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