One Year Later, 81% of SVB's Clients Still Bank With Them - and Big Banks Got Bi...

One year after Silicon Valley Bank's collapse and seizure, "Regional bank stocks remain volatile compared to other types of financial institutions," reports the Observer, "indicating investors' lingering worries about the sector."

But not everyone suffered: Benefiting from the crisis were big players, like JPMorgan Chase. After acquiring First Republic's $212.6 billion in loans and $92.4 billion in deposits for just over $10 billion in May 2023, JPMorgan saw a 67 percent year-over-year growth in profits that quarter. Overall, larger commercial banks saw inflows as customers sought safer institutions to hold their money.
And what happened to Silicon Valley Bank? Axios reports: Today, SVB says it's still the same bank customers loved, but with better risk management and some other tweaks, like smaller deposit requirements for startup borrowers, president Marc Cadieux told Axios last month. 81% of SVB's clients from a year ago are still banking with SVB, according to Cadieux, with "thousands of them" returning after initially switching out...

"I think there was an inference that this was a regional bank crisis, but it really wasn't — those were niche banks," Citizens CEO Bruce Van Saun tells Axios. "The failure was is in governance and the business model."

Citizens is America's 14th largest bank, and as its CEO, Van Saun was asked by CNN what caused 2023's failures at other banks: CEO Van Saun: Both of those banks [Signature Bank and Silicon Valley Bank] went from $50 billion in assets to over $200 billion in four years. They grew too fast, took in a high percentage of uninsured deposits, had very concentrated, narrow customer bases so they were susceptible to [deposit] flight risk. They also borrowed short and invested long, which is a cardinal sin of banking. They didn't manage their interest rate risk well because they didn't have the muscle that you would have if you grew slowly over the years and were heavily regulated like bigger banks like ourselves.

CNN: Who deserves more blame: failed banks' management teams for not ensuring proper guardrails were in place or financial supervisors whose jobs are to identify red flags?

Van Saun: It's a joint failure...

CNN: [W]hat about commercial real estate? The number of people working in offices is much, much lower than it was pre-pandemic. Are you bracing for another chapter of banking stress? What is Citizens doing to cushion against potential high losses in the sector given close to one-fifth of your loans are there?

Van Saun: You have to look under the covers. The nature of our portfolio matters.

Within commercial real estate, industrial, warehouse and distribution space is fine. Multi-family homes are generally fine. When it comes to offices, we have certain pockets of life science businesses like lab research facilities that are super safe because they never had to close during Covid. [Loans to general office buildings are riskier though, he said.] We go through all of that and we say we'll lose some money here, but we're not going to lose our shirt and we've put up big reserves against them. We're working on a loan-by-loan basis with our most senior people. I think it's a well-managed process.