SVB Financial (SIVBQ) 21 Oct 222022 Q3 Earnings call transcript

Company Profile

Participants

Meghan O'Leary	Head of Investor Relations
Greg Becker	President and Chief Executive Officer
Daniel Beck	Chief Financial Officer
Marc Cadieux	Chief Credit Officer
Mike Descheneaux	President, Silicon Valley Bank
Steven Alexopoulos	JPMorgan
Ebrahim Poonawala	Bank of America
John Pancari	Evercore ISI
Casey Haire	Jefferies
Jared Shaw	Wells Fargo Securities
Bill Carcache	Wolfe Research
Andrew Liesch	Piper Sandler
Manan Gosalia	Morgan Stanley
Gary Tenner	D.A. Davidson & Company
Chris McGratty	KBW
David Smith	Autonomous
Jon Arfstrom	RBC Capital Markets

Call transcript

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Operator

Good afternoon ladies and gentlemen. Welcome to SVB Financial Group's Q3 2022 Earnings Call. At this time, all participants are in a listen-only mode and please be advised that this call is being recorded. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] And at this time, I'll turn things over to Ms. Investor of Head O'Leary, Relations. Meghan ma'am. Please go ahead

Meghan O'Leary

for Thank today. everyone you, and thank Boh, joining us you

and Greg third President other Q&A. here results, Our CEO, will members to Beck CFO, and team talk are of Dan our about for joined our be quarter management financial Becker; XXXX by and the our

earnings current SEC CEO of are on available and website. and Relations our been section have Our letter slides, the release, the filed Investor with

results during our this We materially. equally may with will actual forward-looking call review differ in made statements call. encourage disclaimer this forward-looking be earnings to you in applies to statements We and making dealing information, the which release

to SEC now I In our include addition, to those to And may GAAP some filings earnings be release. the non-GAAP turn reconciliation Greg references measures in found and Becker. our Information may financial in our of over call discussion measures. will including about measures,

Greg Becker

Thanks Meghan. Great.

briefly I all Before our dealing questions, we're we briefly. the go with environment, business into to just just on kind the and both market, of, comment want

with business. Let me start the

office, hit our really core allowing our digital of We've Go in international strength weather Global to to the same And a four happening feedback a undeniably great sheets uncertainty. U.K. markets are up record many These from given challenging. factors long-term and highs, all-time relationships they Market all our businesses and at record give of of highs, we us private this clients fee are client quality, other growth. SVB milestones, from platform in to the and Stockholm core time, volatility few clearly going deposit the in We reduced things at business, I are our it is had driving deeper good lower our see SVB. just income, and term think subsidization investment to it's economic help the the arising continue that's to the combined fuel investments global We that on. and this opening and acquisition the good uncertainty are and as clearly public predict at issues with innovation cash going economy highlight economic to burn Fund the and underlying of difficult This when banking Banking reduction making investment is really flow. got important has some momentum and our will normalize. better, new balance very elevated cash near strong pressuring credit client rollout client burn advice number investment

While business a healthy with our client steadfast our get we conditions it's In the firmly balance sheet our base. is believe capital, with for the market, recession-tested And a growth. focus will best meantime, global foundation to strong management, the platform we remain to our track. on manage And four important on capitalize its innovation liquid to resilient strategy, in of economy well-equipped laying levels the well-positioned is these return. we're and note back long-term it on that

operator the the questions. to to Thanks. over line it turn open that, with So, up for

Operator

Take our afternoon Becker. JPMorgan. Mr. first you, at Thank this Instructions] Alexopoulos Steven [Operator from question

Steven Alexopoulos

or actually. morning, afternoon, good good Hey, everyone

Sorry.

Greg Becker

Hey Steve.

Steven Alexopoulos

a start big question. picture with I to wanted

asset-sensitive here? world that peaked? to in your the explain NIM models to you both but rates what's basically you're almost Can us Because sensitive to in now have declined, for across curve, should asset NIM, the NII guiding guidance liability capturing? not asset-sensitive suggest slides So, sensitivity definitely you're but our bank the still real entire some NII, you which live but see has and would the moving looks potentially just happening like and up benefit

Daniel Beck

it's Dan. Steve, Yes,

with quarter bearing to of perspective. non-interest driving static have the we think sheet funds interest have what's we find balance you use balance costs, the sheet, about continue to on continue an interest asset-sensitivity bearing bearing on to from if sheet. end shift levels off-balance of higher to and happening, from interest So, But of

we some weaker higher income cash while a in are benefit from we're in mix seeing environment quarter-to-quarter interest income that venture perspective, shift of interest interest on net space the levels still deployment, basis. slower So, while this is getting to and burn, a bearing higher sensitivity driving in net

Steven Alexopoulos

outflows, raised something with helpful two times what if during the pretty that outflows on on are VC we to of spend Or stabilize? now rates shows getting nine line, now see that's and this stay you historical going QE simply more the need else spent? capital And Okay. chart And was level which slide inflows at was do because there?

Greg Becker

there immediate hire max Steve to be didn't, you lag let of you've once kind a the start didn't I'll jump last there'll first fully a year last the money is a raised year, of reason it see funds that take raised a -- spending It clearly the take is does be to things we an you the in there. Greg, be about the way the a lag And when all quarter think other cash Yes, probably the function, that the the would of appreciate And me that. all as they raised is money was people well. in, one while to that didn't this right. way, the we that's and that there'll burn it, part last

in of you it's it's the then look of And your burn. cash dollars private. look because variables, to at to and inflow, both so those look to have hard the to but you And question have you both at public going answer have at variable

back a four about if little while to think it'll it look cash this quarter that was and -- to will quarters part a similar XXXX, we we kind But to year. the it And going back if as to think basically get to we level that, get to go as last you at back perspective. was So, we take from that, early of back of to continue level of a get three, level same burn certainly drop. back to way the two, take that burn, cash may

analysis and I invested and capital this can think same was venture that say, over true half we're roughly, the which last capital the XX%, in a that capture look we You gets when back past, note in roughly And go several years, that to at average, the quarter. roughly still venture this we have capturing the it's amount when important quarter, of that. is on of

it next cash going My at bouncing And so level where at it's it's to really kind than almost is burn view, of start venture this prior because level. a level function quarters. of see of for think, the we're several this around the more this the to of capital, at I

what So, in improvement really to is need cash burn. see we an

degree. exactly expect bit happen what We but it, be it and a is to to cloudy when that little will honest, crystal ball

Daniel Beck

Yes, the client last to the is earnings chart at thing is looking that on say, that total you're the funds. Steve, deck in

money burn. towards to we other direct opportunity offset as new deployed for balance of higher have the cash net both on the as to thing from an So, continue to well balance us being for that the sheet more sheet that's levels off to

the from costing just a yield more an else up quarter, consideration. to So, perspective, when something that's But that take all-in to from you're liquidity close ends perspective. a accretive. that's still bit into growing, X% Yes, exiting lending,

Steven Alexopoulos

Thanks.

question. just So, final

deposit into fourth non-interest the investment guide, bearing on you VC assuming the to interest to $XXX billion, level So, of get range? Thanks. And bearing? the what billion mix what's quarter are $XXX that assumed

Daniel Beck

Yes.

the less quarter, burn. for levels assumes we continued the higher continuation and lower that higher -- about off our deploy off-balance or of is client a the cash think range would assume deposits success we venture QX. deposits take range, down deployment balance there, a sheet funding sheet. venture the bringing that lower of what again success -- total environment, Steve, saw deployment than If at from the QX similar to on balance So, And end cash and the our higher of deployment this of things of end we In macro cash burn. bringing client look have sheet funds this even we XX% lower taking lower continuation of venture to environment two of get XX% cash burn, on to another levels and we're with expectation to from a

bearing, exiting year In probably XX% bearing the interest to we're that XX% to terms range. of non-interest in

Steven Alexopoulos

Got you.

Okay, thanks for taking my questions.

Greg Becker

Yes. Thanks Steve.

Operator

you. Poonawala Thank Ebrahim of go next to Bank We'll now America. of

Ebrahim Poonawala

Good afternoon.

Greg Becker

Ebrahim. Hey

Ebrahim Poonawala

I cash following up dynamic. guess, this just burn on

change year ex-XXXX. you here, from see the still So, as Greg, point this best think assume I that we pace investment if is doesn't we out,

deposits in meaningfully do say or the let's you So, is a that quarters seven total? is Thank actually us fair big for of seeing slows outflows investments, stopped as mix for shift in secondly, in will that a where normal see have the cash you see next quarters? new you. years, any for result? And assume VC it down visibility when could few worsen this non-interest the And burn the terms sequentially NII we declined to next bearing we unless shift

Greg Becker

of, kind few of answer Yes. steady, day-to-day generally is extrapolate part quarters function basis of I'd of on that keep I your breakeven the cash and start and it'd would looking quarterly call the The say we of haven't again, that it's envelope similar the keep then take say, that kind you, done we in over what flow third you next can should in Ebrahim, a out if burn it's precise the that we roughly Dan be we logical perspective. to would I is, about get the the so of a the is to probably a basis, before one. first X%, saw to quarters you're if at decline area. flattening, let back kind X% probably it you to see, me from a into a of it visibility I'll question, math, a it's the it slight in a investment. decline When second flat three what quarter, on see then -- question a but is out. math level and expect I What not see see

so would, that. we engagement that? get venture with kind clients a are And sense of I capitalist the kind on we about of what track. that's think other to and what and But we how here's Here that what communications have

definitely just back the was we and gotten you global you and CFO six we sentiment time, has worse. now months greater and a If it months ago, for the capitalists, to concern. Three VC talked a was sentiment venture PE, spent go had concern if of ago, summit

they're And so the communicating message cut know, are, your you that burn.

down. bit come lot if dialogue more should be that serious, and you've it say, it's little cash lasts this would burn long maybe predict. didn't continue I a And down even of even little to is which come again, you just we difficult defensive. how more just was to got were quarter, a a that imply see -- surprised I cash. Now, That we'll bit it's why would last and see quickly

Daniel Beck

in have that replace depending cheaper, we on dynamic, And onto off-balance which with then sheet, deposits extent to overall and deposit to think rates. of picking costs close bank same net continue know, the higher associated how with the to much the can of balance money in sheet time, much higher sheet to commercial that strong to follow-on dollars NII sitting with sure. are in data balance generally off beta of those on range, may with we If the solutions, you the I on accounts, for the are continue the margin the lending, then to we're to question capture terms the we -- from which see new what's interest is good XX% of At of rest rolling the up that the higher deposits. rest those of, lending are

generally So, deployment see speaking, I'd burn on But start and to that we could XXXX rebound. and until head some into pressure margin be net continue to overall some income interest as net interest offset. cash the

Ebrahim Poonawala

as where of borrow. Is book to of kind part on? liquidity deposit bringing liquidity, the sheet tied any and restructuring on have you see to higher scenario ability cost sheet balance securities the just meet provide some the of liquidating you'll funding there then to off-balance ton a to so and to opposed funding And just excess

Daniel Beck

about you way mean, to really I mentioned, it, the Yes, flexible. the as sheet's I think balance think

deployed to important out talked and really deposits and think cash effectively sheet using earlier been this of bridge by we're between have off-balance burn funding this being securities We period book market. of wholesale supported the that's I into the balance about and time and the amount that is

is news the good securities down. that First foremost, paying portfolio and the is constantly

needs. about to meet even funding So, interest we're billion increase quarter rates those $X roughly seeing a as

as balance, we're going that'll talked opportunities. to expensive funding sheet to overall drive able reduce to burn provide about before, of opportunities that's to off Additionally, cost up more the in funding open balance comes reduce the be wholesale into where We've going a this funding and funding. to

got So, got we've to sale the time, available with sales all with a that We've a been that portfolio. we've that considerable considering At past. same ways flexibility balance with for we've sheet. always the we're lot of like of the portfolio demonstrated opportunistic the in and optimize

Ebrahim Poonawala

I'll Got Thanks. it. re-queue.

Operator

you. to Evercore. John now We next go at Thank Pancari

John Pancari

afternoon. Good

Greg Becker

John. Hey,

John Pancari

per flow maturity know book coming off or billion book, a Dan that per to Just coming bottom quarter? you that in total that’s you is cash back $X that? to quarter add the the pay-downs, there I off mentioned said cash bond just the is flows the

Daniel Beck

go duration regular some the some But principal that's the a over range. from we'll bolder see billion you'll of again, maturities the start of see maturities regular the maturity Yes, portfolios, in In the the in bolder through. quarters as come into get start to treasury on. portfolio later next [ph] with time, those least come at four as to pay-downs And down we that $X we out Treasury are perspective.

John Pancari

is basis? Okay. $X that And extended hopefully billion, that

Daniel Beck

-- that's -- think now considering are the Yes, the we have mean, there. where the vast of in rates mortgage majority and we extension portfolios, I most

John Pancari

us what you you're be [Indiscernible] on? composites, what of quarter bringing like, the for again if rates market would at on remind Okay. were specific sheet And more example, this off-balance they could just brought kind

Daniel Beck

a accounts. on, as so fund deposits in Yes, off-balance bringing reminder, money that sheet we're was generally that they sit

money balance of pay on So, to the they're effectively both deposits have a have that sheet, spread rates. off bit In us to to order allows market product for to drive effectively for getting us those or a we that. the

it, that are do the sitting that let's So, than call sheet. high on twos beta, with have we're range you organic, associated obviously, the deposits of paying in, higher and naturally they rest balance the know,

John Pancari

Okay, got be off-balance eligible that how of on? of the And to funds. back billion again, sheet is Again, brought much $XX to the it.

Daniel Beck

it perspective. from half Yes, perspective. paying it's from we'd say appetite. right of is roughly we'd it's the client how say we we're obviously, from client half, a thing and a do obviously a lot raid But always availability And roughly perspective, an

John Pancari

Okay. still of for maturity the thing any portfolio, way. in for that intent terms there, portfolio mentioned, just restructure the the portfolio the and no you in And me, last then optionality -- just you taking, that sale development have there's and the health to --

Daniel Beck

There to is no held that restructure to portfolio. majority intent

John Pancari

Okay.

me. right. That's all for it Thanks. Okay,

Operator

at We'll Thank Haire Casey you. go Jefferies. now next to

Casey Haire

quarter. borrowings Thanks. last Good and on the billion wanted I billion quarter evening, touch guys. another the to on $XX in early this $XX

rate Just kind you what is of borrowings? the Yes. are what term paying -- what and guys on the kind of

Daniel Beck

Yes.

Dan. it's Casey, So,

borrowings the the some short-term of turned less to some that's than low maturity, high right that out range. So, a X% of of X% in now, we've got year in on We've mix X%s, a range.

Casey Haire

-- -- that second October That billion the $XX quarter? all Okay. billion billion in $XX in and $XX the in billion, and $XX all XQ

Daniel Beck

in at at billion, the of along So, quarter, we're balances terms the I of those end something sitting lines. believe XX

the of say of the with, I'd close a that we're to year short-term. so rest and And XX%, less sitting about

Casey Haire

to you is Okay, this -- the and -- just it couple normalize. deposit quarters got you. burn slide on take a the assumption going like All the sounds the right. of the VC beta -- And so then -- cash DDA, XX, to NIB

deposit is the beta I higher. DDA is, lower and mix then obviously in is consistently I'm marching that XXXX, what's moving the, So, mean, the assuming

Daniel Beck

the as exactly Yes, harder come we earlier, going mentioning that's play to now. visibility right out were is on how again, to by

to non-interest think -- I you'll higher downward bearing at those some bearing get levels. That continue to the continue interest be some proportion think will to said, I see point, stability as there pressure we to being rates. on of at

as where slow Just we're I exactly rain and that to to much how into to bottoms to mix going and out, in and down. we're that think further I slows the bearing of bit little But non-interest think go start And XXXX, going that really reduction pace in are think question that's mark. be we I here a more from slowdown shift clear it already see fast rain, it'll effectively I XXXX that expect that see bearing a those So, as activated, that's for where a interest happening.

Casey Haire

Okay understood. last third rate, X,XX%. for for up which guide the driving healthy that? step at quarter And Securities ex-SIVB X.XX% and just What's a quarter me fourth is from that's that one X.XX%, pretty fee run the

Daniel Beck

we see of your on we'll off-balance the to through interest spread And Yes, improve spreads benefits on see spreads higher improved continue come continue accounts. there. the to sheet rates the

rate coming continuing income really payment So, increase that's the impact the our fee other well to categories. progress good of fund against see through on as as client

of FX, at the You our activity. look cards, look at rest you and

as really in that the deployment our midst in that this slower mentioned, environment So, business seeing Greg through we're come and clients active are activity. of

Casey Haire

Okay, thank you.

Daniel Beck

Thanks Casey.

Operator

We now Jared you. Fargo. at Thank go Wells next Shaw to

Jared Shaw

afternoon. good Hey,

Greg Becker

Jared. Hey

Jared Shaw

hold pricing? around have at closer that you financing, any haven't, VC need a I companies capitulation take out? out those a characteristics long And are lower look that? that of how I we down that guess guess when to sort for when of stick for that Are you there the before to point can taken they they

Greg Becker

market fact money pace that I them much with year. of the challenge the fast repricing Jared, private raised many Yes, last so guess, the -- is biggest at a

a out running don't to cash, round. worth got -- you've more if not raise you years' at money So, of down you're three

takes for that. time And so takes do it them to it

are things be right. that happening coming some to there's up, going Now,

valuations do and you you how start looking year, stock the to at of end that. price the have because like things at So, options

of market end So, into little lag. at to this there's a because sometimes we could will the through know the capitulation there XQ valuations probably a and see, is, filter you see, of of which we'll back a more kind whatever bit QX-ish of, and on year,

do right we're And more would rounds, structure we're to keep maybe round, when venture the we're of end debate, now, never you structured the price, a pain, see But your the structured liquidation that. lot world. So, can, you can to your the preference return not And valuation, keep a if down simply of a it. a same Xx of capitalists, to you market, perspective, more you more when of and which but means take seeing the some seeing do sit happen, we're from rounds, a and going there's do it always it's going cetera. It's down medicine say, lower with valuation round. raise your et you others say, would protect money not a

all out. a that's its but that to with so seeing that's, that conclusion But more they cash main we're have fair coming. amount yet, So, don't reason come to just play they of up of ended now, the right

Jared Shaw

Okay.

That's, you lead the own? for guess and there your investments that on you been your Are the holding that -- to proactively from are valuations own if having you then rounds any to on haven't marks all Or are you're wait check? Okay. company? investments, take And treating making helpful. market recent that's Thanks. give how your in

Daniel Beck

Jared Yes, Dan. its

current is gap regular we have get the updates where and valuations those in pretty some position. with the liquid at least positions, really warrant On we

position where an quarter. So, a older this we losses funds through those on had some additional with quarter still reserve took ownership come had associated last we and

as we go-forward positions. where and So, expect all through illiquid that's probably see fund be losses. a and And those on we audits to about QX valuations think They're it through going part the additional of a on we as way basis, updated may QX. would

that about of over quarters. of anywhere So, worth magnitude the and of think write-downs the positions. of couple of of next that is $XXX XX% illiquid of could in a form see between kind pool of million X% We order

in to the by more that at to be offset continue limited cycle. be occasional quantities is going we gain the see, think may losses warrant those I which Now, point this but

Jared Shaw

Thank Okay. you.

Greg Becker

Yes.

Operator

Bill go Wolfe to We'll Carcache now at next Research.

Bill Carcache

downside downside on Thank what's question on I XX%. at you ratio from but maintain had behind XX% discuss you you. a looks from the the lowered like credit, color basis ACL scenario waiting? weighting lower XX the that? Any points, Can

Marc Cadieux

that. Yes, this I'll is Marc Cadieux. start on

aligned And closer We that of which increase. the more a Moody's in so much time basis XX words, but at outlook. after our forecast, Fed not XX And so in on view so many and point recent the conclusion most the our was forecast assumption nutshell, with saw quite. the economic was same an included

we standard And for down, our so way weighting at XX% weights, took all the quarter. scenario the to it back not of SX kept but this

Bill Carcache

from discuss provide little the that customers from Understood. that characterize how And determining How you bit gets to funding lending is? you're capacity to seeking separately, a would you are funding? that demand you funding? your seeing Maybe customers competitive environment relative how on

Greg Becker

Greg. Descheneaux This and start then Maybe I'll Mike may to is want add.

harder be This So, more was no amount last that it's and was should right? equity. major the market, money. that year, in, competition coming were raise clearly, venture healthy it the we to year, in expected, seen competing demand definitely while capital competitive but yes, an we've year question a with definitely uptick was Last of there's

people now in back or insurance -- so if And debt want vogue. policies, is so

all and life new is on loan very and So, this the The is technology the level been in coming are delivering products science specifically term of area, pipeline. sheets actually clients across activity, has and backlog board healthy. the

the have interpret to least you question And -- you to? want capacity is, absolutely. on orders may fill Your that I'll the all the answer at it. Do

loans Dan onto in of ways to balance have said, As the those capacity we a sheet. lot different the bring

that's do, given. they fill when And Assuming we're course, to able orders. Of those that qualifying a

quarter. And we what of see excites we that seeing about this many that. actually So, one what -- it's us in no areas in so especially third we're saw slowdown far,

you into Mike, roll we anything we -- look a look to at third XXXX. growth And as what into the add to get would roll the at take in that? quarter. ready So,

Mike Descheneaux

and the questions Right. are would down cautious lending particular? I doing downturns. more a of through And answer think I to course, just bit we anything I -- being essentially we've interpreted, are the be or more economic we're little who mean, around we been is, yes. different go about

teams pay and are in what recognize attention this terms to to to of more kind Our to of very that to in during versed might companies cycle. be this economic well vulnerable

So, are eye for example, impact. that's to take we some one keep on such area macroeconomic hit area sort things or or consumer as the definitely given this to got because an certainly that's an that going industry backdrop sector and of inflation,

little So we more example those through kind different at than we're need environment looking where one of just a how stronger. sectors economic had the if are thoughtful of was to be thinking the and bit

Bill Carcache

helpful. giving one I of could broader you're that follow-up your your guidance, one would of that the the sort growth, of extent that that expect if dynamics we're And that you lines, that concern I you're be know not loans. you're the sensitivity those I environment but Is certainly persisting you to it just on the overall of the -- about market you could be type there's maybe And could as being the speak asset-sensitive? essentially seeing. up those think accretion. of dynamic perhaps and would given and thoughts generating through sort if of last money liability that some putting we with spread is funding shine cost about along that some reasonable, the think Thanks. to that think and rates if you'd kinds maybe, yields sort NII funds,

Daniel Beck

add. XX% of coming talked the dynamics of the XX%, through over particular, on Yes. is we're at and close lending that kind on to commercial we Bill portfolio, I'll start that Mike seeing again, it, we loan lending. just in to and beta of If rate look side, about variable the want

but is actually spread funding will not strong So, it. grow going feel we'll as that a not maintain to levels good those be I our we to able certainly base to at to reprice there, continue entire continue just

So, good anything the feel lending about Mike, I side. that on that?

Mike Descheneaux

we're maybe level on Yes, we getting then we And I think the there's actually the the spreads. impact can payment competition the that of of have. is pricings to

And it's competitive. longest as know, it so we still -- competitive very, time, very was way, the by for all

loan so And -- segments the this significant pressure were in portfolio, the would as was as funds. a environment, tighter. certain getting I there non-banks is where trend their other drive of very not being banks spreads or are cost of particularly downward and down say of conscientious

And the spread is say baited, on a spreads bit. think some there's that nonetheless, expanding possible wouldn't pricing so little neutral I it's bias less downward build a but pressure And a -- to maybe more it's lot at -- I time a neutral there. to bit a this

Bill Carcache

my taking for Thanks helpful. very questions. That's

Greg Becker

Yes.

Operator

you. Thank go next Liesch Andrew We now to Sandler. - Piper

Andrew Liesch

good Hey, afternoon. Thanks for taking questions. the

of guess concerning what here, the And loans Just relatively small that to is overall I I that? percentage a drove but increase criticized as still in on the was you?

Marc Cadieux

start. to of mentioned earlier economic cycles would same clients to as At our more insofar I in about. call, the Marc, time, were environment think liquidity. in criticized Hi, loans that projected continue past robust relative we it's talking I'll the Concerning reflective the concerning. be any And worsening have increase as and continue conditions

uptick so criticize, loan And or a are you in to losses. not the an we while we loans see, see seeing that third non-performing quarter, in increase as can translate did in

Andrew Liesch

it Got this? credits you. the general just portfolio of downgrade or a that drove issues Is with individual target from any

Marc Cadieux

healthcare as generally our there falls investor-dependent imagine. probably you tech it our Yes, more I'd And would and segments. in is speaking, say on concentrated heavily portfolio

Andrew Liesch

how investment rates? high right. Are capped no benefit, fast fees. you All at it. And the raises Got Fed or then those matter just the on kind housekeeping a item all continue to or of how client

Marc Cadieux

some teams on renegotiated those of years, Mike over last work based good they've and the agreements. Yes, couple by the

client So, fees. we cap don't investment those a on see

a basis that where is cycle, kept rates point basis is a rate of but are Now, like beginning that points. at about got it points and every is with we the point versus probably XX not the basis basis and expect another every XX the two to expectation for the one half

Andrew Liesch

that right, my much. All so it. questions. Thanks Got covers

Greg Becker

Yes.

Operator

at we next, to Morgan Manan And Stanley. go Gosalia

Manan Gosalia

was have was Most quarter been jumping if for more NIM XXXX. year stage, back weakness think But the answered just I at off there environment? a in for if I do you but Maybe you cash afternoon. up guide the in and wondering of And there's next sort that? levels good the you can and half as and Hi, recognize in for could you quantify on NII XXXX. help the funding remain not pick this talk also weak, how enough I terms be a of quickly the point that burn? see some do flip but about wondering will NIM just if funding visibility NII -- side, of can rebound

Daniel Beck

Yes.

As talked this is we -- Dan.

talked net of sheet interest really fluctuate have got past about, potential income. and to That it's a margin cash that to income higher good QX, where flexibility balance going that exactly with and burn see to interest rates and we now the have rates looking to are continue sheet really at hard the for As compression. where going deployment balance on we're use seeing of to between amount is sense going and and to to could offsets beta do we've interest burn, we're side we're or by the long to unbalanced jump of at come off to we're We're as the remixing I book. some funding, in the through off think environment drive lending net least this continue where margin the cash start in venture the as we're them those where the of net that deteriorate for again, year the off funds, XXXX. venture

-- I certainty, first obviously to the lot get I degree know, think much be how as that's going we think Just clear. is into more quarter, you a the of

how those can Now, funds the off start can, in, deployment, just quickly, quickly. deposit to some activities in it to from market some balance see the can If start quickly redeploy public the we we side as and inflows rebound? down you borrowings effective see burn if appreciatively and very cash on either not slow do have of stabilization past, the the we of increase, coming to mentioned, sheet. we or some And pretty pay ability to there, start

exactly does balance really start mark. and But happen, to able as move to we're to sheet. that's So, out play when question Quickly. to as it be soon going a the start how to is going

uncertainty. a probably you just there's satisfying So more all bit super answer, little understand a because not the pieces. But hopefully,

Manan Gosalia

curious, worse Yes, it already what that's have story gets Is quarter? on gets the cash et companies? contracts, are on to severance, the because renegotiating you cetera. typically, I you that hearing part a burn before spend helpful. cash And private was from burn this of then better,

Greg Becker

into Yes, that that Greg. one chart It's this is factored all we show.

part So, it's there. the equation of is in built that

Manan Gosalia

much this I guide Okay, but for accounts does how sweep brought in great. were And this, And what apologies then XQ the assume? deposit of missed XQ? on if

Daniel Beck

higher to that degree that we I in could something successful, in the total to And that be to slower, continue So, quarter you guidance dollars, on we extent billion, the terms $X those burn side, balance the let's cash assumes said, the albeit lower off of for range deployment in To quarter, billion, see lines. the a end guide, to it roughly, balance sheet on on along like brought quarter. slower the sheet. call that us it $X fourth fourth the and to and in of those get smaller faster

Manan Gosalia

Great. All right. you. Thank

Operator

to next Gary Tenner go at D.A. We Davidson. now

Gary Tenner

client and there? changes Thanks. of you slide, wonder over out considerations it policy you Afternoon. as in the talk and to your just relates pointed Chinese to for On funds if any changes XX, the companies. slide considerations investment investment maybe China client strategy China the was policy one could I

Greg Becker

add and From kind it. Greg, there's will -- you perspective, of is quarterly, Mike basis. at know it policy weekly, can look a start I'll And to this of problem, monthly, a that's I a the changes variety on So, whole things.

level. policy And just so is stance a high at part the overall of the very

relationship. I think and the of the the and about versus softening policy the positioning China weakening U.S. or

local, think the it? would a level, able color might the Mike, cause on I you're is what market happening going just may high My on any changes view you you at to it that would macro add the local at Mike, on policy level. that some be that's mute. still to So, -- ground. is give in

Mike Descheneaux

you, Thank Greg.

of impact us changes all certainly right. think I policy

have. but of and setting still really the chain good I of help But I the think think impact the is just going on is overall aside, bigger relationship actually level And there. bigger picture early actually certainly question supply key that's how we will to that is where -- the the activities policy focus kind it's that the of different and impact a again, on relationship trending. to businesses too COVID U.S.-China tell

know, In terms affected had it and we with engaging extremely levels business business activities challenged as of that in Asia certainly been overall. and our all economically, China,

continue to It's something or no here macro at this other. way just about juncture. really picture direct the So, impact watch, this the but is more to one that

Gary Tenner

not from cash more just sure Why been it would not. the And How it's not that Okay, I the slowing comments, over desire How kind close if side? cost lending mean Xi's on I I it has to companies? some much and like President guess of balance burn, change, on the point questions -- in really is appreciate yet or that population years, founders this and kind the just has at that of seems I decade focus ability, any to a several free recent or at to sheet think we're CEOs then that. it the there's maybe or was yet. slowed wasn't last has the referencing that? -- of obviously, these benefit for the startup -- to it. potentially of we scale sunk about or degree lastly was that several were

Greg Becker

exist. some -- there's mean, of I that Yes. does

I the business earlier years' I it So, the growth, is fundamentally although costs, needed your question -- money in it's is -- that raised of believe money It's the this the I back its how off money a you've the lot sound, you and lay and cut -- worth that, business will back to say -- function -- about can't maybe over raise Part I itself acknowledge been an of, to how add mentality make revenue, it, to future. be years for is be grow you people harder some is, about and of way would your really way your still into you hard as to but calls, why let's you you're evaluation that you're success think saying, or And you which three of is value, of cash. grow definitely if you answered think of is raise to it to going bunch four a if time, old can't exists, is, how raised. or this, again, your a has much work and you about so going cut right?

So are out more look well, months, nine have runway, money that a these and performing -- but cutting, the that companies they're long to still of right. have raised are or months, to there companies raising going cutting, if there's time either at you more fast that six forward, a at more burn, lot

it's them must go you you case. later, two and -- Sometimes raise that later, like well. a these lot having we it literally the then let's remember be were horrible and people back if one oh kidding, last the XX ago situation. doing more the all go it point, COVID, be back in money my XXX what your not hard cut burn. going a increase that days days really There's to happened time. and And was companies and cost, really just a That's again, of no, feels -- years did said, gosh, They

heads. definitely call it of was COVID is still think some of some their one the I So, their that fake-out in

The answer, every -- we or in That's see across just are no. wouldn't So, a dramatic company the more because of burn. kind slightly I do think reduction little there's complex haven't different. a just you in But reasons of it's it's answer's of the those bit is Board? a fully seen that set -- yet

Gary Tenner

appreciate I Thanks. the answers.

Greg Becker

Yes.

Operator

McGratty now Chris We to go at next KBW.

Chris McGratty

but and balance which around little about you gave AFS, yields, on that's the Thanks. the Great. dollars, you for stuck me the off? the of is bond HCM the kind average speak Dan, on the what XXX bit can yield around outlook yield just just know thrown wondering a those? sheet, I to on just at the X%

Daniel Beck

in a yield just next least exiting pickup X% Yes, there from at but we all premium QX the we at at yields in everybody ahead, remembers also of least going off, bump quarter quarter get are was from income. the amortization is lower we're expectations so some part our QX couple decline for securities that the net X%, look to as going quarters. range roughly the then to this think lower see yielding Net-net, some to roll I around interest here in

Chris McGratty

then maybe a question just And Greg on Okay. charge-offs.

you the come? would losses, I'd of last when but unfolding, love if the are As a built you bit you color less see You world on the will little quarter quarter, and losses this be? when going think like, to we bit little reserve cadence when do get think a the you

Greg Becker

that I better. probably Well, answer can question, Chris. is help Hey, Marc

Marc Cadieux

Yes.

the really the I difficult guiding answer. we're with consistent we've think talked of uncertainty all think very challenges XXXX, for and I a question So, to about, that's

to liquidity, -- going wait back is client it think speak downturns. I And too is robust whatever are again. really ability might when longer the I it I exactly to probably reopening, capital for case. But been the next live otherwise companies speaking, right, to come difficult point. predict just of portfolio have this bars More to so relative again, they comes generally losses and positioned, think than the to other will these start average last make that the outlast for when long to about that where think into to if past that they'll at flowing come enough side

Greg Becker

a you look think loss. is most being saying losses, the was cycle area to the XXXX stage. something about that through the early Marc magnitude, And that and dependent would we investor that we're about not what to see see X% to the were if expect take cycle, that if add continue to at a we we And see Chris, if to reserve, of saying, the types that those you to

range So, we're at now. that X.X% right

pretty feeling of to relative a that could what good in from that perspective. environment like So, look type reserve

lending to about were of, again, portfolio and slower just is experience have last to kind extent losses a capital we've associated those that come, we call the overall with it. and losses. if there, sufficient The concentration terms reserves to in thinking look like credit of even what when the So, might got lending that of thing remember, say the loss period,

Chris McGratty

Thanks. Great.

Greg Becker

Yes.

Operator

next Poonawala go to we'll of now Bank And at Ebrahim America.

Ebrahim Poonawala

the picture, than for my taking thanks question This Greg. question one big again. Hey,

expense-wise, perspective? for don't a terms So, self-help lot in mean but there your there market-driven. that say the way capital-wise, either Is is you to to of company of to cut of and the mentioned, outlook you on is need earnings alleviate I prosperity, for as what's earnings ROE? And balance sheet-wise, do market-driven anything happened you anything to pressure the could some this

Greg Becker

changed. have professional actually of done, about that going growth, the institution is a years, doing front two long-term And think kind potential, we of as anything with foundations. long so helpful or let or we've anything an want and build may from what of growth make a and financial a came because at, or LFI, we talk function, standpoint, up in know, expenses, taking And as core us risk-based had large to diminish from the me outlook to that the And our then backs feel look But truly lot we're or doesn't about in area in short the Mike, be the may it in And the year, that playing I've but lot sheet, of won't the it last Yes, to doing? belief in One needed run, as we years, It a you opportunity three years, else better long hasn't functions. about services, a potential run. expense feel it in may of good over the long are Mike. know, perspective, game. we're out two we've you that the sense. just and time. Ebrahim the been balance When Dan, talk I a here the build

to even was Now, as We're FTEs, very We've it's of and faster really got the to we a board to brought expect going form we reducing on us it. brought we in help than in aggressive then about manage good incredibly feel be way. this. maybe in planned. team that services professional the the through expertise going talented I happen

to so biggest reducing -- possible. what as you going the And biggest to thing. going as do we're what thing is probably are the again, do, we services That's professional aggressively

some there priority which ones efforts hard the and look the at The it. do second on like make more the includes have we'll concentrate must changes our of platform. And backburner as looking put never, the taking and portfolio, things in part that and a on the that not that definitely at of say our and are prioritizing, initiatives, we is have the focus than digitalization standpoint, eliminate be Not which must highest really haves. to the overall the we're and say it'll versus from but that project projects we nice

invest digital that out As course over I And of positive rollout in to mentioned banking and our solution of that gotten in XXXX been feedback. we're we've continue going to my more the incredibly rolling some and comments, XXXX. opening and

to investments. So, have those we to continue make

I XXXX. or be have as So, don't lower while it's would will going been, it Dan, we would healthy the than anything. into be still expense growth to Mike roll know

Daniel Beck

I'll to start might and add. have something Mike

$X.X -- back a raise platform and us, the long-term. just opportunities to are powder worth in go venture Five to of from on all capital those the expenses, -- added for have one, to dry continue trillion we new perspective, in think X,XXX add I to quarter. clients medium I the the

materially the -- over probably for us to cut on that back So, really opportunity investment, into Even investment term. here pull cut levels longer

that. on bullish through At to really anticipate still the we're play franchise. So, we point, some

sheet, up, size talk Ebrahim now ratio start about we support where we a close growth need seeing X in the forward in cash balance be the Yes, is a in balance this see to to be think X% quickly you in sheet. slowing in to potentially investments you that's the So, spot two, overall environment, able clearly capital the year, bank number reduction Number next leverage growth start some Tier on go to capital venture of one. to very pick at about burn, as that the could basis.

got that's have capital it it'd talked amount the about So, to the at not that good like Last thinking to options deployed. securities no with We're the but investment sheet that. some we're I of a support waiting have about of be that flexible options really at to sale venture portfolio for lot balance we've portfolio the we've And and we that got that's to least, investment available is about time. think point, intent up associated be this able be highly thing this always is to the portfolio, securities we it's way flows it. that restructure pent clear, and to evaluating be

Ebrahim Poonawala

That helpful. Thank you.

Greg Becker

Yes.

Operator

We'll go next now to David Smith Autonomous. at

David Smith

the SVB Great, change the environment new to bring thinking hire terms or when thanks how in on or current for taking out my questions. about if build you're of With products Securities, teams? about new does there

Greg Becker

Yes, this this Greg. is is

-- So, couple guess, I It's an a points. interesting the answer's no.

job, look at how exceptionally tables, at your doing, kind So, the look of good when is you one which is an is bank ways team investment the of the league right. obviously we doing

in tables, and truly they they're exceptional their fair you they're see it else, aside up in market, share, just share. are they been team I more fair have league and some or how go is when put definitely in the cases again getting moving and So, everybody say, out the exceed The their tech we but out had board. market in I the competing year than exceed on hanging getting with Number or that numbers. is all in the And clients. we people set one. a and number what the with meeting those goal we going two, market for for team, that them team to brought beginning We're the science and spend of the hit life time for the this -- where

And environment. the happened pretty that's in so what's amazing, given

that and final research exceeded have on analysts, group addition an their is of this. people what feel So, The perspective piece again, are side leaders The they expectations. the amazing tech research the to people in And good we've really and added market. of about from MoffettNathanson, a also that. the

gives of the market team benefits -- with the team back time actually high companies of that that the public that market up. well. going time who the going One profile slowdown those meetings really And be really it strong ECM in are a to when spend opens will is

market believe I that and when that up so going it does to open always it And really we're will eventually, be well-positioned. does,

not be only that commercial collaborating So, is the well I've exceptionally whole with but it's our bullish if you people, honest, actually if platform, That more going know team anything, how on well. of bank. collaboration gotten to

we're So, working market hard be is, set for about while to it. it feel course. get these I cooperate The I'm But cooperative? -- the guys answer Would awful to for good more, I'd more success. like to of waiting awfully it up future -- are

David Smith

are X% bit uptick seeing about is are more, point? there for kind any the couple for of talk quarters guide a going little the the of next fourth kind of around going starting quarter quarters, Or range securities to likely $XXX that be million in side you when XXXX? on begin, quarter, the appreciate of given to just like for into couple -- we to And the I of the fourth next X% bumping million Right. the meaningful $XXX lower more

Daniel Beck

know, seeing additional to us the put that from as additional curve than XXXX opportunities, think could we're float higher additional up in you provide that hedging, I on perspective. forward there's we're still a to Yes, absent, and swaps effectively be for no where environment that rate we open rate exiting what think, received room should upside, some some we're asset-sensitivity

opportunity some there's think I So, there.

of yielding off actual see think to off the the that will but the lower those of over I see see I next a some years, don't portfolio. cash bump roll-off coming up flow of you couple material -- of even levels, securities, in

David Smith

is getting we're yields the point Fed to looks to way? And to variable rates, some or of work start you. closer reduce you the as book Thank otherwise the peak there in component protect it asset lending like a where lastly

Daniel Beck

-- think as with up are now past, I we a for us that for continuing the look move us to down, Yes, associated to to the and I'm the first I foremost, during at portfolio positioning in asset same done the as embed right here protection XX do matter and expected is one-way of well, position contractually post-XXXX think continue that benefited sensitivity, same to the we've the open significantly for just loan practice thing. and to time, quite --

that's off know, So, down short term right to bearing potential of protection now, with accounts us. us that's vast rate and that that on further, higher continue move rates see of rates the source funds, sensitivity. the another find right But levels putting majority great on-balance folks as moves, to that the for you'll to with protection downside now. we Fed ways interest of the we're If to see manage even sheet

David Smith

Thank Great. you.

Daniel Beck

you. Thank

Operator

Jon last our at question Capital take Markets. from Arfstrom we'll RBC And

Jon Arfstrom

hanging the for thanks end. Hey, to on

answer difference that outlook? last on no pause, in follow-up your help-hurt terms a would question. have How of Just Would that? Fed you or

Daniel Beck

to want add. Greg might I'll start,

ideas. I between uncertainty valuations, that around slowdown, big like some our to funding a that's and deployed flow venture all reduce management that if the that -- start market more of I worth founders equity about $X.X that raised. start stopping these are to from the that see What's step really amazing talked that's into public trillion being back at disconnect we bouncing the a that To working this and been across teams take Fed bring funding look markets -- valuations really you these are extent we expectation in pause are think going and is public and think of certainty deployments, on markets. there's of or

perspective, for broad just that I one, helpful. would be think, So, that deployment a

slowdown, in. in rate at deposit pause rate coming sensitivity, helpful, a additional we of would -- really from help continue would a pause are perspective flows we as -- a likely be won't But a that terms could that just point. this asset Second or see it the

Greg Becker

add would right looking it's I and isn't clarity, -- thing and any for but now. They're only certainty. said, markets just The for just is Dan looking the there Yes.

that well data So, the backs up and would now. a the pause clear pause, I received think market a right clear by be

crystal and what talk to clearly that would economists you say helpful they now. over is right map what -- If five different literally isn't would their ball the be all

Jon Arfstrom

I do you and quarter get losses, me the fourth speaking but your $X crude gains just for but when here? I then do uncertainty, EPS, And that. calculations and too that difficult in somewhere represents if of wrong, a on just is between I'm that from for appreciate for or feel I the to you guidance, excluding Okay, like $X.XX midpoint correct EPS trough or predict

Daniel Beck

mix. look ultimately, going drivers big happens are earlier, As heading are and that non-interest we from interest to like net many so first variables of cash what going we're perspective. here what are income from level bearing the quarter, interest into bearing mentioned there things be drive venture and burn, to the to of what Those the deployment, seeing in a

be pressured or here. reduces see of So, that from burn, -- could and could stability we materially down cash

than I to guidance. think go that, us any against not would giving go So, the further

Jon Arfstrom

Thank right. much. you very All Okay.

Greg Becker

Yes.

Operator

you, Thank things you turn Becker, any I'll Mr. back comments. to for sir closing

Greg Becker

sheets I on equation. to about the inside the about important are for close just I'm sheet the where employees was of just by it, out many at but that we've strong both our and look credit are people Thanks, that's Great. not investors, highlighting positive based no there I high on, about what talked Coast really change. to how everyone part conversation the for the although appreciate predict XXXX, Thank give what record most things we so to inflows. lost balance be, said, evening, sight it's uncertainty some uncertainty, you. question to going Again, happen, joining you're fact started could and is you can everyone, East sure I the so and know as so for on going again, All I the to will us. not guidance listening. the it. on and all-time into going given this. know difficult frameworks can't and things that make the we're that the XXXX, into think And on funds that that. term of client I will clearly clearly of drivers are and platform. a that's want There's we've exactly and is quality, going clearly and that lose you who what the the there's I great and also that very really discussion

there's -- are think where up now, ended always, right stress all honest, clients. I be as we I and it's thank off, them our shining, I that's support a know lot questions mean, First and them. there know to right of want through been them ask what we've a how to we before the And in to for be and, and lot we difficult to of because to how cycles times.

it's like add to sit from actually and be enjoyable clients. really challenging It it And to value is honestly, environment is this. an in down standpoint, so to my

first. So, the Thanks. that's

of a thanks And maybe we've of to got a one, second one that working we've employees, time, new bigger been The hard. people even are period really people cycles. haven't is, have long through people of lot been that a the for here added lot the

all And the sometimes getting all hard benefit from you and the don't all recognition the you're feel that work.

the the uncertainty, for Executive a to great to of doing job, say on the us a such huge with of behalf supporting on navigate want just team Board, as and and So, team, it. our we this difficulty thanks behalf weathering clients, hanging

of us. thanks with rest a great for and have So, again joining that, your day

Operator

wish you us that Financial QX you evening. to joining Thank for earnings We'd the conference SVB Good bye. conclude you, Becker. XXXX again Again, and great a Mr. and will gentlemen Group's like thank call. ladies

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