Magazine article American Banker

Investment Banking Unit A Boon for Silicon Valley

Magazine article American Banker

Investment Banking Unit A Boon for Silicon Valley

Article excerpt

Silicon Valley Bancshares' better-than-expected second-quarter earnings received favorable notice from analysts last week.

"Top-line results blew away expectations as all major line items easily exceeded projections," Brian Conn, an analyst with Royal Bank of Canada's RBC Capital Markets, wrote in a note Friday.

He noted that Silicon "posted its strongest quarter in several years," though he expressed concern about higher expenses.

On Thursday the Santa Clara, Calif., holding company reported net income of $15.7 million for the quarter, in part because of improved performance in its SVB Alliant investment banking unit, which had been a drag on earnings in recent quarters.

Earnings per share of 43 cents beat analyst estimates by 4 cents and topped Silicon Valley's own guidance of 37 to 41 cents delivered April 22.

Last year the $4.8 billion-asset company was forced to restate second-quarter results, posting a loss of 2 cents a share, to reflect a $17 million pretax impairment charge associated with the September 2001 acquisition of SVB Alliant.

Silicon Valley also restated its fourth-quarter earnings to reflect a charge of $46 million, or 42 cents a share, because a substantial decline in revenues from the investment banking unit affected how it accounted for the deal.

This time around it had good news about SVB Alliant. Overall noninterest income increased 80%, to $31.5 million, primarily driven by the unit's revenue. Silicon said revenue was boosted by a particular transaction -- it did not say which one -- SVB Alliant completed during the quarter.

The holding company, which continues to focus on start-up technology, life science companies, and private equity, despite a recent diversification into financing for premium wineries, said it there was also an increase in warrant income. (Banks often obtain warrants when making loans to start-up companies that have yet to go public. …

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