I’m back on the road again after a bit of a break, this week I have two clients to visit. Silicon Valley Bank (SVB) in Santa Clara and later Granite Construction in Bakersfield. I just spent a great finance day in Santa Clara. The SVB office is right next to Levi Stadium, home of the now hapless San Francisco 49ers. Did you know, for those who gamble, that the over/under for the 49ers is just 4 games. If you think they’ll win more than 4 games put your money down in Vegas. Good luck with that.
The training was good, the group this time around was a HR team. Really the HR leaders at SVB. The day went by fast because of so many great questions. SVB continues to perform really well financially and their stock price shows it. While very recently it’s been a bit down, the trend is up. SVB has a great business model and thus they can be fairly conservative on their balance sheet and still deliver a good return to investors.
While several things make SVB unique as a bank, a couple of key attributes are their low cash deposit base and their strong non-interest income. The low-cost deposits come from their strong relationship with technology firms in the Silicon Valley. The technology firms tend to hold a lot of cash in demand deposit accounts. This provides a great source low cost funds that SVB can turn around and loan out from these low-cost deposits. At the end of 2016, SVB had about $44 billion in assets and over $30 billion in non-interest paying deposits. Most of their funds for loans and other investments come from low-cost funds. Consequently, SVB has a higher interest spread, which is the interest cost of funds used compared the income generated by those same funds loaned or invested.
I have worked with SVB for 6-7 years and I always enjoy my interaction with them. I also get to visit the Bay Area where I went to graduate school, UC Berkeley, and where I was born, Palo Alto. Always good restaurants, good food, and nice weather.
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