Canadian banks are stepping up their talent raid of Silicon Valley Bank, days before a liquidator seals the fate of the failed California-based technology financier’s unit in this country.
Canadian Imperial Bank of Commerce CM-T said Wednesday that it has hired two directors from SVB’s American operation, which was sold by the U.S. Federal Deposit Insurance Corp. to First Citizens Bank FCNCA-Q and Trust in late March, less than three weeks after the bank failed.
New York-based Ben Shephard is joining CIBC’s innovation banking practice – the largest such business in Canada, providing specialized financing products to early stage technology companies – as executive director, while San Francisco-based Sean Thompson becomes a managing director and market lead at the Canadian bank’s Menlo Park office.
“We’re continuing to bolster our team with top talent in key markets,” said Paul McKinlay, vice president and head of U.S. origination with CIBC Innovation Banking, in a release. “Ben and Sean’s combined experience and know-how will be pivotal as we look to help fuel the next wave of software and tech companies.”
At least two other large Canadian banks are in active, advanced talks to hire several employees from SVB’s unit in this country to join their technology and innovation banking groups this summer, according to two sources familiar with matters. The Globe and Mail is not identifying the sources as they are not authorized to publicly discuss the matter.
Several global banks have taken advantage of SVB’s collapse to bulk up their businesses. HSBC took over SVB’s British arm and rebranded it as HSBC Innovation Banking in June. U.S. investment bank Stifel Bank & Trust hired three senior SVB employees in March in an effort to expand its business to venture capitalists and tech startups, while Mitsubishi UFJ Financial Group in April hired more than 20 SVB staff to expand its technology banking practice.
Five of Canada’s Big Six banks have groups that specialize in offering lending products to technology companies, which typically don’t generate profits or have hard assets that traditional lenders would look to secure as collateral on loans. Toronto-Dominion Bank is the only Canadian bank without such a practice in the country.
CIBC’s hires follow the promotion of Mark Usher in February to lead its innovation banking team with the departure of former head Mark McQueen, five years after selling his technology sector financing company, Wellington Financial, to the bank.
CIBC and other banks started charging into the innovation lending space in the late 2010s, as the Canadian technology sector flourished and company valuations soared. In an investor presentation last year, CIBC said that the division grew its loan book to $2.9-billion in 2021 from $400-million in 2018 while expanding pretax profits to $59-million from $12-million.
The technology unit is hiring as Canada’s banks face slower growth across their businesses amid climbing expenses and shrinking loan demand, which is squeezing profits. Royal Bank of Canada has signalled that it hired too aggressively last year, while Bank of Montreal cut more than 100 jobs in its capital markets division.
The banking sector has faced heightened investor and regulatory concerns since SVB failed on March 10 after a run on deposits by its technology sector clients. The sudden collapse added stress to the depressed technology market, as SVB had been a leading financier of early-stage sector for decades.
But the failure left the fate of SVB’s Canadian unit up in the air. The Superintendent of Financial Institutions took control of the unit’s assets shortly after the parent’s collapse and appointed PricewaterhouseCoopers Inc. to oversee the unit’s restructuring, as part of a newly created bridge bank controlled by the FDIC. The shift made it possible for an acquirer to buy SVB’s U.S. and Canadian assets together.
But the Canadian unit was ultimately left out of the US$16.5-billion deal by North Carolina-based First Citizens BancShares Inc. to buy portions of SVB. The Ontario Superior Court of Justice issued an order on May 1 approving a sale and solicitation process by PwC.
Unlike the U.S. business, SVB Canada had no deposit-taking business in this country and had just $301.3-million in outstanding loans as of April 11.
SVB Canada has 50 employees, which have been helping to run the business while PwC pursues the process. Submissions of interest and non-binding letters of intent to buy all or parts of SVB Canada were due May 29. Binding offers from qualified bidders were originally due June 26, with PwC aiming to settle and execute a binding agreement with the successful bidder this Friday. However, PwC’s website now states the second bid deadline has been moved to Monday.