BALANCE SHEET TO
The sale of substantially all of our AFS securities will enable us
to increase our asset sensitivity, partially lock in funding costs,
better insulate net interest income (NII) and net interest margin
(NIM) from the impact of higher interest rates, and enhance
We expect to reinvest proceeds from the AFS sale into a more
asset-sensitive, short-term AFS Portfolio. To further strengthen
balance sheet liquidity, we also plan to increase our term
borrowings from $15 billion to $30 billion and hedge
these borrowings to mitigate higher funding costs in the future. We
expect these actions to better support earnings in a higher-for-longer rate
environment, providing the flexibility to support our business,
including funding loans, while delivering improved returns for
While we will realize a one-time, post-tax earnings loss of approximately
$1.8 billion in connection with the sale, we expect the
reinvestment of the proceeds to be immediately accretive to net
interest income (NII) and net interest margin (NIM), resulting in a
short payback period of approximately three years. As a result of
these actions, we expect an approximately $450 million
post-tax improvement in
Taken together, these actions will further strengthen our capital
position. We expect them to be immediately accretive to EPS
(excluding the realized loss) and improve our return on common
equity going forward.
We are confident that these are the right decisions for our
profitability and financial flexibility, both now and for the long
TO WEATHER SUSTAINED
Our financial position enables us to take these strategic actions.
SVB is well-capitalized, with a high-quality, liquid balance sheet
and peer-leading capital ratios.
Even before today, we had ample liquidity and flexibility to manage
our liquidity position, with one of the lowest loan-to-deposit ratios of any
bank of our size, income from progressive securities paydowns,
levers to manage our off-balance sheet client funds, and
substantial borrowing capacity. The improved cash liquidity,
profitability and financial flexibility resulting from the actions
we announced today will bolster our financial position and our
ability to support clients through sustained market pressures.
The vast majority of our assets are in high-quality, government and
agency securities and low-credit-loss lending activities.
We’ve demonstrated strong credit performance throughout cycles, and
the risk profile of our loan portfolio has significantly improved
over time, with strong expansion of the lowest-risk categories.
Early-stage loans, our highest risk segment, today makes up only 3%
of the portfolio.
Our flexible balance sheet and long experience navigating market
cycles have enabled us to effectively support our clients over time
and establish a longstanding reputation as a trusted partner in
both good and challenging times.