As recently as their latest conference call(last Fri.), SIVB reassured us as to their solid loan portfolio. For a soft as pudding loan portfolio please see Comdisco-an about to be former competitor of SIVB.Another potential former competitor is Imperial Bank-Detroit acquirer Comerica will likely discourage high-tech lending. With the absence of the two most formidable competitors SIVB should receive better pricing on their loans.Their sound tech underwriting is again demonstrated. If you are an SNL investor,invest here with caution as this is a very different kind of financial institution.
CDO is not a bank. The former CDO CEO did a lot of VC funding. SIVB lends to VCs with cash as collateral held in CDs at the bank. VCs lend/invest to start up companies directly with out any collateral in most cases. Cash is the ultimate colateral. On the CC SIVB said that those CDs are untouchable by others even if bankruptcy occurs. Think of it like Evil Kneval. If Evil was the start up. SIVB would make a loan to the jump promoter (VC fund) Evil's boss for evil's motorcycle provided the promoter used a CD as collateral equal to 80%+ of the motorcycle loan. SIVB would also buy the advertising receivables from jump promoter. Prior to the jump SIVB would have almost 100% of the amount lent secured or paid back in fees. They would also have a warrant on a bonus if Evil makes it. Should Evil crash and die The promoter pays or they take the CD and wish the promoter well with his next show with Robbie Kneval and the promoter is the one that owns the burning pile of junk that was a motorcycle.
SIVB is not a normal bank. They are in between a bank and an investment bank. This is my understanding of what they do and how they do it.