National Bank wants SVB’s Canadian portfolio

In a strategic move to strengthen its presence in the tech industry, National Bank of Canada has announced its plan to acquire the commercial loan portfolio of Silicon Valley Bank’s Canadian branch. This landmark agreement will see the bank take over a portfolio specialising in the technology, life science, and global fund banking sectors, effectively diversifying its commercial loan offerings across Canada.

The portfolio in question represents approximately C$1 billion in loan commitments, with around C$325 million currently outstanding. Once the deal is finalised, the assets will be integrated into National Bank’s esteemed Technology and Innovation Banking Group, known for its full-service banking and tailored advice on venture-lending products, growth and M&A financing, treasury and foreign exchange management, investment banking advisory, and private management services. Additionally, the bank has made direct investments in fintechs through its corporate venture capital arm.

Michael Denham, Executive Vice-President of Commercial and Private Banking at National Bank, expressed his enthusiasm for the acquisition. He stated, “With this acquisition and following years of high growth by the Technology and Innovation Banking Group, the Bank strengthens its presence in the tech industry across Canada. As the bank keeps expanding, we are thrilled to support Canadian innovation in sectors that offer solutions to the many challenges our society is facing. We are upbeat about the future of technology-based companies, and this acquisition demonstrates our commitment to this belief.”

The agreement is expected to close in the coming weeks, pending regulatory approval. It represents a significant milestone for National Bank of Canada as it seeks to enhance its involvement in the ever-evolving technology landscape. The move comes at a time when technology-based companies are playing a crucial role in addressing societal challenges and spurring economic growth.

This acquisition also stands in stark contrast to the recent turmoil in the banking industry, exemplified by the collapse of Silicon Valley Bank in March. The bank’s downfall triggered the most significant banking crisis in the US since 2008, sending shockwaves through the financial sector. Silicon Valley Bank had accumulated nearly $167 billion in assets and $119 billion in deposits, primarily benefiting from an era of near-zero interest rates.

However, when interest rates began to rise sharply, the bank faced a severe liquidity crisis. It had invested billions of dollars of deposits into long-term US Treasury bonds to generate returns for its clients. As depositors demanded higher returns, the bank was forced into rushed sales of these bonds at a loss, exacerbating the situation.

The loss of investor confidence was further fuelled by social media coverage, leading to a classic bank run. Tech investors rushed to withdraw their funds, exacerbating the bank’s liquidity problems and ultimately leading to its collapse.

As the banking industry faces challenges, National Bank of Canada’s strategic acquisition presents a contrasting tale of resilience and growth. By expanding its foothold in the technology sector, the bank is poised to play a significant role in supporting Canadian innovation and contributing to the country’s economic progress.