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SVB says Goldman Sachs was the buyer of portfolio it booked losses on

Stock Markets Mar 14, 2023 11:20PM ET
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© Reuters. FILE PHOTO: The logo for Goldman Sachs is seen on the trading floor at the New York Stock Exchange (NYSE) in New York City, New York, U.S., November 17, 2021. REUTERS/Andrew Kelly/File Photo
 
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By Echo Wang, Niket Nishant and Saeed Azhar

NEW YORK (Reuters) -SVB Financial Group said on Tuesday that Goldman Sachs Group Inc (NYSE:GS) was the acquirer of a bond portfolio on which it booked a $1.8 billion loss, a transaction that set in motion the failure of SVB.

The loss on the portfolio was the reason 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 raise was thwarted as depositors fled and investors fretted SVB would have needed even more capital.

The portfolio SVB sold to Goldman Sachs on March 8 consisted mostly of U.S. Treasuries and had a book value of $23.97 billion, SVB said. The transaction was carried out "at negotiated prices" and netted the bank $21.45 billion in proceeds, SVB added.

SVB became the largest bank to fail since the 2008 financial crisis, and was taken over by U.S. regulators on Friday.

Goldman Sachs' purchase of the bond portfolio was handled by a division that was separate from the unit that handled SVB's stock sale, according to a source familiar with the matter.

Jacob Frenkel, chair of government investigations and securities enforcement practice at law firm Dickinson Wright, said such arrangements to handle conflict of interest are typical in major banks.

SVB says Goldman Sachs was the buyer of portfolio it booked losses on
 

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Comments (2)
J Kortz
J Kortz Mar 15, 2023 4:06AM ET
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*GS netted 70 bps in 48 hrs on a $21.4 bill portfolio with weighted avg maturity of 6+ yrs …they didn’t even have time to structure an internal hedge, plus the explosion of treasury volatilty allowed them to write volatilty premium against the portfolio purchased - this is one of the greatest fixed income trades in the shortest periods of time in the history of GS, and modern finance ( 70 bps at a 5yr duration is almost a years worth of rate shift…in 48 hrs) jpk
John Bozanich
John Bozanich Mar 15, 2023 1:17AM ET
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Hmmmm, I wonder if Goldman Sachs even cared whether or not SVB survived as long as they got that insider gem of a low risk portfolio?.. Probably already sitting on billions in profit
Teena Marie
Teena Marie Mar 15, 2023 1:17AM ET
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Nah, the bond portfolio was no gem. 1.79% yield for three to six years.
 
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