Q2 2021 SVB Financial Group Earnings Call
And thank you for standing by and welcome to the VEB Financial Group Q2, 2021 earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask the question. During the session you will need to press star 1 on your telephone.
The require any further assistance please press star zero.
I would now like to hand, the conference over to your first speaker today, Meghan O'leary head of Investor Relations. Thank you. Please go ahead.
Yeah.
Thank you everyone for joining us today are president and CEO, Greg Becker and our CFO, Dan Beck are here to talk about our second quarter 2021 financial results and will be joined by other members of our management team for the Q&A.
The current earnings released highlight slides and CEO letter has been filed with the SEC and are available on the Investor Relations section of our website will.
We will be making forward looking statements during this call and the actual results may differ materially. We encourage you to review of the disclaimer in our earnings release dealing with forward looking information, which applies equally to statements made on this call.
In addition, some of our discussion may include references to non-GAAP financial measures information about those measures, including reconciliation to GAAP measures may be found in our SEC filings and in our earnings release and now I will turn the call over to our President and CEO Greg Becker.
Thanks, Meghan and thank you all for joining US today as you can see from our earnings announcement and slides, which we filed a few hours ago, we had another quarter of exceptional growth and profitability marked by continuing trends of outstanding balance sheet growth strong net interest income robust fee and the market related.
The income and solid credit.
As a result of our outperformance we once again increased our 'twenty 'twenty 1 growth outlook.
We're also thrilled to close our Boston private acquisition on July 1.
I'm sure you'll have lots of questions about that.
In the meantime.
Try to make modeling a little easier for all of you. We've included a high level breakout of our expectations for the incremental impact on our 2021 the outlook.
When we start talking about our 2022 outlook next quarter, we'll wrap those impacts into our overall outlook as we've always done with our private bank.
And now as is our practice, we'll go right into Q&A on last.
The operator to open up the lines for questions.
Thank you Sir as a reminder to all participants if you have a question. Please press star 1 on the telephone came back again that star 1 on your telephone keypad. However, if your question has been out thinking you wish to remove yourself from the queue. Please press the pound key please standby.
While we compile the Q&A roster.
Our first question is from the line of <unk>.
Steven.
Louis with JP Morgan Your line is open.
Hi, everybody.
Thanks, Steve.
Greg I wanted to start with the Big picture view and all of the years <unk> been doing this have you ever seen the business the strong even dating back to the pre dot com period.
Well so the short answer is no.
But Steve you and I talked about this a lot over the over the years, which goes back to the basis of our business from what our focuses on.
So being exclusively focused on technology and life Sciences, and we've always said.
That market is what we believe is the best market to be into.
And especially during the pandemic, what we thought was going to be an issue. It ended up being really being a catalyst for growth in the innovation economy.
It's slowed down for a brief period of time and then when they really weren't a lot of other alternatives from an investment perspective money really flowed into the market that was incredibly strong for the second half of 2020 and clearly as you can see from the first half of 2021, it has been exceptional but really technology.
And health care are really taking over really the growth from my standpoint from a global perspective, and a lot of people are investing in that and we're benefiting from that.
Okay.
That's helpful. If we look of the growth in total client funds, how should we think about this like how much is coming from new customers new customers continue to go up each quarter and how much of just larger rounds in IPO proceeds.
Basically its the off balance sheet, just becoming a parking lot for.
IPO proceeds of basically.
Yes, let me Steve I'll start on any of it.
Secondly, the Mike may want to add to it.
But the growth in funds its actually been pretty balanced.
So you know the.
The IPO market and public market activity has been more of a catalyst on it has been because of obviously picked up in the second on the second quarter. So that's that's a percentage, but it's not a huge percentage.
Most of the growth has come from new financings from existing clients and then clearly given that we added 7.700, new clients in the quarter at.
At the early stage, mostly that adds to it but the biggest driver is coming from existing clients raising increasingly larger rounds of financing.
Yes.
Okay.
Hey, Steve maybe I'll, just add a little bit of color to what Greg saying when.
When you think about night, new clients go back to our new client acquisition engine I mean, it's on it's 1 of the best obviously use of the best out there and this quarter, we had record quarters of faults in terms of new client acquisition. The other 8.
Keep in mind.
Those are new new and so it takes a couple of months of the Max They really the start to ramp up their deposit flow, taking so think about it as like an engine that you start to see it here and then that gives us good flow, whether it's 3456 months down the road and then going back to what Greg was talking about earlier on in terms of the unprecedented flow of activity.
Youre seeing again as you know the dry powder, if the base now.
But what Youre also saying is.
The people crossing over of more going into the BC Theyre seeing the great returns you see the back phenomena as well of those debt starting to pick back up again I know the dropdown in April.
Non traditional investors the corporate venturing on the sovereign wealth funds of Theres, just a lot of funds going into kind of going back to what Greg of thing as well too as well.
This acceleration of phenomenon because of Covid you had a lot of good ideas and business models that are being far and get a lot of good talent in attracted to the markets of no doubt the tailwind are incredibly strong here right now.
You had a second parts of your question of Steve, which is where is it going and when you have such a low rate environment and you will recall of this just from non.
2 long ago when rates were back on a very very low level.
You have this because there's really nothing or very little yield you can get off balance sheet, you end up on the spot where it's kind of split between on and off balance sheet and it's about 50.50, and it was that way not that long ago and when rates start to pick up.
The more of that starts to move off balance sheet right now and again for the foreseeable future we're going to be in this low rate environment. So I think it's a good day.
Gauged, the to expect where theyre going to be.
Greg just the final question on that point why has the maybe the for Dan why is the expected fee income benefit from higher rates picked up so much on the off balance sheet compared to last quarter. It looks like it's almost doubled thanks.
Yes, Daniel when you go ahead.
Yes go ahead and.
Steve If you take a step back and you think about what's been happening the repo rates have actually been negative throughout the quarter.
And as a result, that's been eating some of the existing spread in the off balance sheet clients on so.
1 of positive development during the quarter or is that the interest on excess reserves has increased so we should see a small improvement going into next quarter on at least the bottoming of.
The reduction in margin in client fund the fee income so that's that.
The driver and I think we've hit the bottom.
Okay.
Great. Thanks for taking my questions.
Yep.
Yeah.
The next question is from the line of Abraham from Noah <unk> with Bank of America. Your line is open.
Hey, good afternoon.
I guess, so then just to round out the Steve's question on.
Fancy deposits.
You mentioned the 911 bps in your slides for the first 25 basis points hike is that at this point of contractual there we should expect debt if rates go up the.
First.
On line 11 bps of he's sitting on happened immediately.
Yes.
That's the structure of those products, we it depends on the competitive situation. There may be some blend of where you give up a basis point or so but contractually once you get that 25 basis points.
That's from the return.
Got it.
I guess on.
The 2 O T a letter of gig and in the slide deck, you talk about accelerated investments I.
I was wondering if you can give a little bit more color around these investments and payoffs both in terms of what youre seeing at leading and building on the investment bank debt and then in terms of your plans with Boston private over the next year.
David I'll jump in on that.
What we tried to do is described on slide 12, just the breakdown of all of the different areas, where we see investments and so it's a pretty broad portfolio.
You asked specifically about 2 areas 1 is investment banking.
And so I would say a couple of things about that 1 is the.
On the existing business is doing exceptionally well, they're moving up the league tables there.
Theyre getting incredible accolades and I would say they are definitely a world class investment bank and the life Sciences area.
And we basically said, we and we've said this group from the day that we brought on leerink onto the platform that we didn't want to just stay on health care, we wanted to actually build it out across other areas health care services and health Tech.
We brought Barry Blake and a bunch of other people and again building on the health care services into a world class team and now and then.
<unk> said this many times over the last 12 months building out our technology investment banking side.
So we're I would expect to hear announcements from us formerly <unk>.
The middle of August around the Middle of August to give you a lot more clarity on that.
But theres no question. We believe this is a big opportunity.
And it really stems from the.
The core business, which is the commercial bank and how deep those relationships are on the market share that we have the relationships we have with those clients.
And it's just the natural fit to then leverage in the technology investment banking, so and that's going to be broad, it's gonna be sponsor finance being a big driver of it it's gonna be true M&A. It's also going to be ECM and so we expect all of those businesses to be build out in the build out later this year.
Sure.
Now from a return perspective, we expect that we're gonna be continuing to make money. This year on investment banking and next year as this revenue start to pick back up of pickup from both our core business. The health care business technology and health care services that we would expect that to see very nice growth.
You know what what could it look like in the.
We would expect although it's early debt on the low end, maybe roughly of $100 million of additional revenue from the new initiatives up to me the $150 million, but again, it's very early in the market is really going to dictate that along with how fast the teams get up to speed, but more to come on the investment banking side of your second question.
Was on private banking and I just go back to the.
Slide that really is about our strategy and that's really on slide 11.
<unk> really lays out where we're headed as a company and how important that is and on a lot of them you can see that again the strength of Silicon Valley Bank is really the catalyst to then take clients introductions to the private bank Leerink and of the SCB capital in the private bank with the closing of Boston Private you have dramatic.
We upsized what our capabilities are so we were just having the conversation today at our board meeting where really we have the entire product set now the entire product set to take care of our clients and it's the first time in our history. So we expect nice growth on that business that growth is built into our.
Forecast for the balance of 'twenty, 1 and.
And next quarter as we always do we will then take those forecast and then start to give you a firsthand look avoid we expect in 2022, so more to come in the next 90 days in DRAM.
Got it and just 1.
Quick 1 on the NASDAQ private market investment is that of client acquisition tool or is that 1 way you.
For the the intention in relationship with the existing clients. So I'm just wondering the thought process around debt investment.
Yeah.
They're both true.
But if you were to say, what's the primary driver of the primary driver is helping the commercial banking clients. That's the primary driver.
We said this all along we want to be the 1 stop shop, we wouldn't be able to take care of our clients needs no matter what those those are and when you think about the.
The length of time companies are staying private they are staying private longer but 1 of the catalysts to allow companies to stay private longer is making sure that employees and investors have liquidity have access to liquidity and we believe NASDAQ private market and the consortium thats being built is going to be of.
Great solution for that so very excited to be at to be a solution for our clients and as we laid out in some of the other investments that we've made in the kind of highlighted other groups that will benefit to the private bank will benefit because they're going to have more liquidity being generated from these individuals who are clients of ours that sort.
The Leerink, we'll be able to provide investors to that platform, who will then look to purchase the stock on the private companies who are looking to sell of the individuals. So again, we believe it's for our clients, but it services the whole platform.
Got it thanks for taking my questions.
Yes.
The next question is from the line of Ken is there.
There'll be with Morgan Stanley Your line is open.
Alright, great. Thank you.
Hi, again.
They start off good morning, Kurt.
Evening, maybe.
Maybe start off with the guidance.
In terms of the expenses.
I think you are now looking for a mid <unk> growth rate.
I haven't run all of the numbers quite yet, but it feels like the jump up in expenses or the expense outlook seems a little higher than the revenue increases like the NII on the core fee increases.
Was that intentional in terms of.
Just trying to figure out if there's additional investments being made beyond what you originally thought maybe 3 months ago.
So I'll start Ken and then I know Daniel just to get into a lot more of a lot more detail.
What I would look at is the.
Pre integration of Boston private and so 1 of the things we did as I said on my opening comments is breaking the expenses to enter the 2 different areas.
And so part of this is incentive compensation, so forth paying for performance.
Part of this relates to investing in the business.
And so those of the 2 biggest things on the third 1 is the investment we're making in investment banking and we expect to make an investment banking specifically on the technology investment banking area. So that's how I would break it down we tried to give that detail on slide 33, where you kind of have those different sections, but to give you more details I'll turn it.
It over to Dan.
Yeah.
Yes, Ken channel generally speaking it should be pretty pretty close to offsetting.
Yeah. If you look at our annual guidance, we increased that outlook by 10% and that excludes Boston private and the integration costs and Greg.
I went through where.
Of those those areas are of.
There's clearly a lot going on and expenses in the future for this quarter.
We're going to at least give a little bit more detail on Q3 and Q4.
Just on everybody's on the same page. So in Q3, our expenses will likely be in a range of $725 million to $750 million and that includes Boston private but excludes the restructuring charges non I'll drop back into the $720 million to $740 million range in Q4.
Then, including Boston private and excluding the restructuring Q3 is going to be elevated because of that.
The quarter that we expect to recognize the significant amount of the Czech investment banking team hires so that the that at least should give you a sense of where that run run rate of Q3 and Q4, when we look at the integration and the integration of restructuring costs. We think that's going to be roughly about 100 million pretax in 2021.
With roughly 80% to 90% of that coming true.
In Q3, but back to your original question largely speaking excluding the restructuring costs.
Should come pretty close to offsetting the increase in the investment within the guidance.
Got it understood, Okay, and any of the revenue or the associated revenue of the technology investment banking pieces that also in these numbers or does that really start to pick up more next year.
There's a little bit Ken in the expectations for the second half of the year, but it is.
De Minimis de Minimis number so if it if it comes at the happens it'll be upside.
<unk>, which is the possibility in the second half of the year, but again, if all things play out the team will be hitting the ground in August and then we've got work to do to start to generate revenue.
So that's why I tried to give some idea of.
A range of misses a very high level range of what 2022 could look like from a generation from both technology investment banking and healthcare services investment banking revenue.
Got it Okay, and then if I could just ask 1 final question in terms of Securities. Obviously I saw you added on.
Of the $18 billion North of your Securities portfolio. This quarter can you just talk about like what you're investing in.
Including duration of that I'm just wondering.
Wondering how it splits out thank you.
Yeah. So the vast majority of what we're adding.
We're adding agency issued mortgage backs commercial mortgage backed securities.
In our smallest of municipal bonds in the quarter, we added a small amount of corporates as well.
But generally speaking that's.
Where we're adding duration wise in the quarter. We spent most of the time, adding out in that kind of 4 to 5 year duration in those products, So thats, where youre seeing the pickup.
At least in the yield and we also had a good quarter just in the acquisition of municipal bonds.
When we're acquiring and we put about 2 billion to work in the available for sale portfolio of buying much shorter dated treasury securities. So obviously not picking up a ton there from the yield perspective, but just making sure that we're continuing to build out that high.
The highly liquid part of the investment Securities book, but all in looking ahead, Ken when we put money to work we think the purchase yield on an all in basis will be kind of 120 to $1.30 based on today's environment.
With the substantial or the vast majority of the purchases were making in our held to maturity. So think of that 3 to 5 year duration of just based on today's rates.
Alright, perfect. Thank you very much.
Thanks, Ken.
The next question is from Jennifer Denver with tourists Securities. Your line is open.
Thank you.
Good evening.
Congratulations on a great hi, congratulations on a great quarter of my question is on Boston private.
Greg can you remind us of.
The retention packages you put in place for key employees. There just wanted to make sure of it.
You know that operations, we can hit the ground running on you guys.
Wanted to yeah, yeah, yeah.
That's a great question, we did have retention packages, putting in place and it was.
On the I'll call it $30 million to $40 million range.
But theres also.
You know, there's there's many ways to think about retention. So 1 is rolling over the instead of options and things like that that are part of that debt continue to vest and where would be in the money given the appreciation of the stock price the other retention and the third part is.
Again, the reason for the acquisition of Boston private.
We said many times it wasn't about cost savings as the primary objective or even the secondary objective. It was building on what they had in adding it to what we had on our private bank to kind of build something unique and so when.
When you if you were to sit down and talk to the employees that are coming over.
Yeah.
They want to be part of the platform, there's a high level of excitement and at the <unk>.
That I saw I think from the employee retention perspective, so so far I think it was 98, 8%.
Coming over so feel really good about it and.
Yes.
I, even feel better about it is as we closed and we're getting together and talking and spending more time together and engaging clients.
Very optimistic that our culture is that the people are feeling good and that we're going to keep.
This talented group of people on both our private bank that existed before and Boston private together for the long run.
And is there any scenario, where you could see more and the other bank acquisition.
With the something else that could fit for you.
Yeah.
Jennifer.
I didn't think there was 1 to start with we've talked about that over the years. So the fact that.
Boston private was something that we had talked about for many many years and it came true.
That's the 1 of the.
Maybe the only 1 that could that could fit so you never say never but it is incredibly unlikely and certainly not anything in the short run if we were to do.
Additional things over time that would be.
In organic.
That could be around the private bank, where its looking at some <unk>, but I would look at those almost more of aqua hires as opposed to anything material we.
We feel really good about the platform, we have right now and all 4 businesses and so that that just isn't isn't the isn't likely and the final point is when you look at.
Our core business and the growth that we have.
Yeah, you know the App.
Acquisitions, the lease right now don't need to be a key part of our growth I think we're doing okay on our own.
Thanks, so much.
Yes, absolutely.
Yeah.
The next question is from broker cachet with Wolfe Research Your line is open.
Hi, Thank you I wanted to ask.
If you guys could give a little bit of of additional color on some of the biggest changes do you expect the face when you eventually become a category 3 bank.
Yeah, I'll start at a high level and I know that for sure the front of add add some commentary on it.
You know when you when you head to a category 3 Dan will get into the.
The capital and the liquidity and 1 of the requirements around that but I should say overall.
The bar is raised across all facets of facets of risk.
Controls.
And we and this isn't this isn't a surprise to us we certainly expected to be crossing.
5 status we had.
Working groups and plans that we're building around that now the came faster than we expected at the end, but we are certainly preparing for it but the 2 biggest areas that we need to be ready for and are getting ready for.
And working hard at it is in just overall risk and controls.
Dan do you want to add more context of that and specifically on liquidity and capital.
Yeah the.
You picked the 2 areas Greg that will be.
<unk> on their mouth level, 4 and level 3.
The level 3 will be exposed to stress testing and the supervisory assessment on an annualized basis.
But I think you're looking at the the other requirements of the liquidity requirements.
And having to.
To be able to process of liquidity ratios on a daily basis on the systems required for that are going to be a big part of the effort on a go forward basis as I step back and I just look at the fundamental financial ratios over time, we'll come to grips with the 100% of what they look like they're looking at our balance of.
And looking at our capital structure.
Don't see significant changes and the liquidity that we hold on the securities that we hold I think we will go to service a long way of the category 4 and the category 3 institution going forward. So I think the majority of the lift is around risk and risk practices systems and things along those lines.
And we've embedded.
Of those costs.
In our guidance here.
When we look at where we are in 2021.
That's very helpful. Thank you.
Last 1 from me.
My other questions were covered but can you speak to you guys are positioned the securities portfolio. How are you thinking about incremental hedges and just overall.
Positioning for.
Whatever ultimately direction rates end up picking.
Yeah, So it's Dan.
I think as we look at the investment securities portfolio of much bigger.
Part of the bank's balance sheet today than it was 12 of 12 months ago.
We've been positioning and really haven't changed the.
Of the thought about it since last quarter.
Continue to buy excess liquidity in the same.
Safe agency mortgage backs of Chi MBS.
First of all bonds in that let's call it 4.
3 of 5 year duration.
And to continue to invest in terms of the shorter Treasury securities from the shorter securities and available for sale that allows for US the continued to put the money to work.
And as a good of of yield as we can possibly get and at the same time protect the available for sales portfolio in the OCI risk.
Are there from a capital perspective, so that's really the strategy that's going to translate at least based on how rates look today.
Purchases in the let's call it $1.20 to 130 perspective.
For the remainder of the year.
I hope to see that we see some improvement on the rates from here, but at todays rates. We think from 20 to 130 <unk> make makes sense.
Thank you for taking my questions.
The next question is from the line of.
Chris granting of array of it can't be doubling the your line is open.
Very good afternoon.
Hey, Chris.
I'm looking at the Greg I'm looking at the <unk>.
Slide 13, just on Boston private and come back to that for a moment.
I appreciate on the deal was certainly more strategic than financial you referenced the 400 billion opportunity.
Over time in the market I guess I'm interested I covered Boston private for years and 1 of the challenges was.
With flows.
I'm, just I'm kind of interested in how youre rolodex of of customers can can help turn on that time and perhaps bring that the revenue recognition sooner.
Yes, it's a great. It's a great question, Chris we spent a lot of time on that as we did or did our evaluation and 1 of the things that.
I look at the that Anthony.
And his team and all of the people he brought on board plus the existing team.
To me it wasn't a question of capabilities.
It was actually as you said, it's a question of where where Youre going after what is your target market and as I think about Boston private their target market.
Generally speaking within the same target market that most traditional private banking groups, we're going after and that's the competitive competitive space.
We bring to the table is a.
Of wealth creation group of individuals that is like no. Other 1 and when you take care of them at a very early time in there and their wealth creation cycle and you add value to them.
You spend time understanding specifically what they need.
We believe we're going to be able to add a lot of deal flow to the wealth team and the private banking team that exists now in the combined in the combined teams.
That's what we have to prove out I would tell you. We did a lot of research we talked to a lot of our clients on what they were looking for and there was definitely a very high receptivity to it and now we got to prove that out but even though its been early its only been a few weeks.
I would tell you the energy of the excitement.
On the quality of people.
That are on board and part of this combined private bank.
Im very bullish on so that was the investment thesis of the acquisition thesis and it's up to US now prove it out.
That's great color. Thanks, Greg.
Yeah.
Yeah.
Once again, ladies and gentlemen, if you have a question. Please press star 1 on your telephone keypad against that Star 1 on your telephone keypad.
Our next question is from the line of John from carrying with Evercore ISI. Your line is open.
Good afternoon.
Hey, John.
Since the R&D 1 quick clarification on your.
Sure.
The tech investment banking announcements that.
That's expected.
The confirm that.
That's the organic range in terms of <unk>.
Hiring or team hiring or primarily organic not.
I'm talking about on acquisition.
Yes, it's all people that will all the people.
Got it Okay, just wanted to confirm and then.
Secondly, just the limit of a higher level, but.
I wanted to get your from your thoughts on the impact of your bank true business more specifically from non inflationary environment.
Saw inflation expectations ratchet higher earlier on.
In the quarter and then.
Tech sector took a hit on your stock took a hit with it.
General and you know the questions came in about how FCB would be impacted.
From a positive from a higher rate environment and the potential fed action given your asset sensitivity.
Can you discuss your view of what the negatives would be to your business from an inflationary environment. The biggest thing is the the impact of loan growth from the pullback in business volume from the tech sector or would it be on warranting the of bigger factor on.
Credit so wanted to get on your take on the.
So John I appreciate the question, but I also don't want of dismiss the first part of the positive part of the question which is.
We would benefit significantly from it.
The increasing rates and we've got several slides in the deck that actually share the.
Net interest income expansion as well as the fee based expansion because of the size of the portfolio and the additional basis points, we would get on those.
On those funds. So I don't want I don't want to I don't want to move past that too too quickly.
Where where could they be there be risk.
To me 1 of the areas is in securities in the warrants you could see risk.
There you could see a slowdown in the pace of investment which has been very very very rapid as people start to think there may be on alternative to investing in high growth.
The high growth stocks.
Here's here's why I think it could happen, but at least.
I think the benefits are going to greatly outweigh the negatives.
I think 1 of the things of this last day.
18 months of showed.
That.
Again I repeat this many times the innovation space is the place to be.
And.
Although when you look at the number the amount of money that's gone into the venture capital this year over $180 billion on the first half of it.
It is a massive number and it's a big number compared to where it has been but when you think about that number relative to the global market and funds flows right. It's still a small number.
I still believe debt, while there will be bumps along the way that the venture capital and funds flow in the innovation is still going to be up into the right and as we get bigger we can support companies longer and the target market of the available market will only will only get bigger and it's only getting bigger.
And so the second part then is on the.
Warrants and securities gains and things like that and as we've said I mean, that's that's a volatile number.
You do have to pay attention to Ipos, you do have to pay attention to M&A, but actually I think if you saw the IPO start to slow down I believe you're going to start to see more more M&A and so what's nice about having that.
A business that on the investment banking side that does both M&A and ECM.
The PCM starts to be slow M&A, hopefully will pick up where we expected to pick up. So I mean, those are things to pay attention to but I don't believe there'll be significant.
It's just in some level of inflation and I guess, the many of my final on my bias, which is.
If we do see inflation I actually think it's going to be modest I don't think it's going to be something that would be.
The fundamental change that would cause the market to get overly overly spooked.
But again something to pay attention to and that's just my own on opinion.
No. That's very helpful. Thank you and then lastly.
Can you sort of capital call portfolio.
I know originally it was heavily concentrated in.
Jack.
In light of signs.
But.
<unk> become much more diversified.
Because we've grown I believe by industry can you just update us on the.
Go ahead of just generally the industry concentrations.
Within the portfolio or just some way to help us with the diversification.
Yeah, I'm trying to get credit too.
Our Investor Relations team, the Mega and Anna.
Because the information is included in the deck and I wouldn't expect that you're going through it so quickly, but I would take a look at slide 44, we actually break that down into great detail. So by industry technology is roughly 36% and you work your way around the next largest 1 is would be on debt.
Funds and then you have life Sciences consumer.
It's a very broad swath of.
Industry segments that we're that we're part of and.
You know part of it is because the Lps are similar that it go after this market and the team has done such a great job.
In approaching the market strengthening credit underwriting, adding more value on that.
It's really been a great few of growth.
Thanks for clarifying that sorry of the and then 1 last 1 on that.
What was the mix.
The technology mix, that's kind of a 5 years ago, the 36% current on was it.
Kind of years ago, I don't I don't have that off the top of my head but.
If I were to speculate I would probably say you were probably the probably closer to 45 or maybe 50 per cent.
Okay.
Thank you for taking my questions I appreciate it.
Absolutely have a good day.
The last question is from the line of David <unk>.
The Wedbush Securities. Your line is open.
Hi, Thanks, I had a question on capital can you comment on the pro forma impact on your leverage ratio from the Boston private acquisition and as a follow up could you comment on your capital raising needs in light of your strong growth.
Yes.
Yes. This is Dan.
I'll start with the second question first and then get to Boston Privates impact. So when we think about capital we really think about 2 things..1 you saw in the quarter. Just the continued strong profitability that we're generating north of 20% from an ROE perspective.
So we're certainly with the strong growth clearing that the cost of capital.
And second support strong balance sheet growth going forward.
Of this exceptional growth that we've seen over the last 3 to 4 quarters continues to put pressure on the ratio that we pay attention to the most of which of their tier 1 leverage ratio at the bank.
If you think about it holding our client liquidity for US is absolutely key and we've been talking about it all day about the profitability on the growth for us the deepen with our clients holding holding those deposits.
The key of our long term profitability so in the quarter.
From a capital markets transaction perspective, we raised additional capital through preferred in junior debt and that really helps support the tier 1 leverage ratio. So the markets have been open to us from those transactions have been providing very low cost of regulatory capital to allow us to continue that excellent growth.
So overall, we're really confident with our capital ratio is the risk based measures of 12% of the quarter end.
In really good shape and considering the substantial liquidity and low risk securities that we have on the balance sheet, but we're really confident with the capital levels overall.
That said.
We're a growth company and if growth continues at the pace of <unk>.
<unk> that we've seen over the last 4 quarters.
All options would be open to us when you think of that would be of good things of that growth continues.
We do what we need to do the support that growth.
Onto your second question on Boston private.
We determine at.
The deal was that it was an accretive transaction from a capital perspective, and it is playing out that way it is.
It's going to provide.
Not a significant amount of support but it is going to be accretive.
2 tier 1 leverage as well as to the core capital ratio based on their capitalization and ultimately where the purchase accounting of played out so it will be a small improvement slightly.
Slightly accretive to the overall capital position.
Great. Thanks very much.
And that concludes the Q&A session I will now turn the call back to Greg Becker for closing remarks.
Thanks, Paul.
Want to thank everyone for joining us today, we're obviously pleased with our results.
Even more pleased to welcome our new colleagues from Boston private the SCB.
Private banking wealth management is obviously, a critical area of focus for us.
Of the 4 key pillars of our strategy, along with commercial banking investment banking and SUV capital.
And we certainly believe that what youre going to hear more and more about on a quarterly basis of how we pull all 4 of these pillars together to build an incredible story for our clients.
We're focused on strong execution of being the best partner possible to our clients while doing the right thing for our employees.
And that really informs how we're approaching our return to office and the future of work at SBB with thinking about our clients, our employees and making sure they're safe and taking care of them.
So we're doing returned to office trials right now.
And.
The future of work at SPD is going to be 1 that is going to be flexible.
Listen to our employees.
We've listened to our clients and we believe it of flexible work environment is going to be the best thing for them and the best for our clients and quite honestly be a competitive advantage for us.
As always on what I'd call out and thank our incredible team on.
So proud of what they've done how they've done it doing it virtually for the last 18 months and it looks like a few more months to go and for our amazing clients for giving us a great reason to come to work.
Every day, albeit virtually thanks.
Thanks, a lot and have a great day.
Thank you for joining today's conference call you may now disconnect stay safe and well.
Okay.
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Yeah.
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