SVB says that Goldman Sachs was the buyer of the portfolio on which it posted a loss
NEW YORK, March 14 (Reuters) – SVB Financial Group ( SIVB.O ) said on Tuesday that Goldman Sachs Group Inc ( GS.N ) was the buyer of a bond portfolio on which it booked a $1.8 billion loss, a transaction which set in motion the failure of SVB.
The loss on the portfolio was why SVB, a technology-focused lender known as Silicon Valley Bank, attempted a $2.25 billion stock sale last week using Goldman Sachs as an adviser. The capital increase was hindered when depositors fled and investors worried that SVB would have needed even more capital.
The portfolio SVB sold to Goldman Sachs on March 8 consisted mostly of US Treasuries and had a book value of $23.97 billion, SVB said. The transaction was carried out “at negotiated prices” and brought the bank $21.45 billion in revenue, SVB added.
SVB became the biggest bank to fail since the 2008 financial crisis, and was taken over by US regulators on Friday.
Goldman Sachs’ purchase of the bond portfolio was handled by a department separate from the unit that handled SVB’s share sale, according to a source familiar with the matter.
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Jacob Frenkel, head of the government investigations and securities enforcement practice at the law firm Dickinson Wright, said such arrangements to deal with conflicts of interest are typical at large banks.
Editing of Lincoln Feast.
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