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SVB Financial Group’s third-quarter 2022 earnings per share of $7.21 surpassed the Zacks Consensus Estimate of $6.79. The bottom line reflects a rise of 15.5% from the prior-year quarter.
Results were primarily aided by an improvement in net interest income (NII), driven by higher rates and loan growth. However, a rise in expenses, lower non-interest income and higher provisions were the undermining factors.
Net income available to common shareholders was $429 million, up 17.5% from the prior-year quarter.
Revenues Improve, Expenses Rise
Net revenues (tax-equivalent) were $1.57 billion, up 2.3% year over year. The top line missed the Zacks Consensus Estimate of $1.59 billion.
NII was $1.20 billion, which grew 40.6% year over year. NIM (on a fully-taxable equivalent basis) expanded 33 basis points (bps) year over year to 2.28%.
Non-interest income was $359 million, down 46.6% from the prior-year quarter. The fall resulted primarily from a decline in net gains on equity warrant assets. In the reported quarter, the company recorded a net loss on investment securities against a gain in the year-ago quarter.
Non-interest expenses increased 1.5% year over year to $892 million. An increase in all expense components, except for merger-related charges, resulted in the rise.
The operating efficiency ratio was 57.29%, down from 57.68% in the prior-year quarter. A fall in the efficiency ratio indicates an improvement in profitability.
Loan Balances Rise, Deposits Decline
As of Sep 30, 2022, SVB Financial’s total loans amounted to $72.13 billion, increasing 1.7% from the prior quarter. Total deposits declined 5.9% sequentially to $176.82 billion.
Credit Quality Worsens
In the reported quarter, the company recorded a provision for credit losses of $72 million, up significantly from $21 million recorded in the prior-year quarter. The ratio of net charge-offs to average loans was 0.08%, up from 0.07% in the year-earlier quarter.
The ratio of allowance for loan losses to total loans was 0.77%, up 12 bps year over year.
Capital & Profitability Ratios Mixed
At the end of the third quarter, the common equity tier 1 risk-based capital ratio was 12.13% compared with 12.73% at the end of the prior-year quarter. Total risk-based capital ratio was 16.26%, up from 15.87%.
Return on average assets on an annualized basis was 0.79%, unchanged from the year-ago quarter. Return on average equity was 13.62%, which increased from 12.47%.
2022 Outlook
Average loans are expected to grow in the high-20s. Average deposit balances are projected to grow in the mid-20s, changed from the prior mentioned high-20s.
NII is anticipated to grow in the low-40s, changed from the prior stated mid-40s growth. NIM is projected to be 2.15-2.25%.
Core fee income (including client investment fees, foreign-exchange fees, credit card fees, deposit service charges, lending-related fees, wealth management and trust fees, and letters of credit fees) is expected to increase at the high-50s percentage rate, up from the prior mentioned mid-50s.
SVB Securities revenues are projected to be $460-$500 million.
Non-interest expenses (excluding merger-related charges) are projected to increase in the low-20s. A total of $30 million worth of pre-tax merger-related charges have already been incurred in the first nine months of 2022 and $5-$10 million is expected to be incurred in the fourth quarter of the year.
Net loan charge-offs are expected to be 0.07-0.12% of average total loans, changed from the prior mentioned 0.15-0.35%.
The effective tax rate is expected to be 25-27%.
Our Take
Given its global diversification efforts, SVB Financial remains well-positioned for growth. The acquisitions of Boston Private, MoffettNathanson and the debt investment business of WestRiver Group are expected to help the company further cement its foothold in the innovation economy. However, the continuous increase in expenses will likely hurt the bottom line to some extent in the near term.
SVB Financial Group Price, Consensus and EPS Surprise
Hancock Whitney Corporation’s (HWC - Free Report) third-quarter 2022 earnings of $1.55 per share were in line with the Zacks Consensus Estimate. The bottom line rose 6.9% from the prior-year quarter’s adjusted earnings of $1.45.
Results benefited from higher net interest income, a rise in loan balance and increasing rates. However, lower non-interest income mainly due to rising mortgage rates was the undermining factor. Higher adjusted expenses and a rise in provisions were the other headwinds for HWC.
Washington Federal’s (WAFD - Free Report) fourth-quarter fiscal 2022 (ended Sep 30) earnings of $1.07 per share handily surpassed the Zacks Consensus Estimate of 91 cents. The figure reflects a year-over-year jump of 48.6%.
Results were primarily aided by higher rates, robust deposits and improving loan balances, which drove net interest income. However, an increase in expenses, a fall in total other income and higher provisions were the headwinds for WAFD.
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SVB Financial (SIVB) Q3 Earnings Beat Despite Provision Hike
SVB Financial Group’s third-quarter 2022 earnings per share of $7.21 surpassed the Zacks Consensus Estimate of $6.79. The bottom line reflects a rise of 15.5% from the prior-year quarter.
Results were primarily aided by an improvement in net interest income (NII), driven by higher rates and loan growth. However, a rise in expenses, lower non-interest income and higher provisions were the undermining factors.
Net income available to common shareholders was $429 million, up 17.5% from the prior-year quarter.
Revenues Improve, Expenses Rise
Net revenues (tax-equivalent) were $1.57 billion, up 2.3% year over year. The top line missed the Zacks Consensus Estimate of $1.59 billion.
NII was $1.20 billion, which grew 40.6% year over year. NIM (on a fully-taxable equivalent basis) expanded 33 basis points (bps) year over year to 2.28%.
Non-interest income was $359 million, down 46.6% from the prior-year quarter. The fall resulted primarily from a decline in net gains on equity warrant assets. In the reported quarter, the company recorded a net loss on investment securities against a gain in the year-ago quarter.
Non-interest expenses increased 1.5% year over year to $892 million. An increase in all expense components, except for merger-related charges, resulted in the rise.
The operating efficiency ratio was 57.29%, down from 57.68% in the prior-year quarter. A fall in the efficiency ratio indicates an improvement in profitability.
Loan Balances Rise, Deposits Decline
As of Sep 30, 2022, SVB Financial’s total loans amounted to $72.13 billion, increasing 1.7% from the prior quarter. Total deposits declined 5.9% sequentially to $176.82 billion.
Credit Quality Worsens
In the reported quarter, the company recorded a provision for credit losses of $72 million, up significantly from $21 million recorded in the prior-year quarter. The ratio of net charge-offs to average loans was 0.08%, up from 0.07% in the year-earlier quarter.
The ratio of allowance for loan losses to total loans was 0.77%, up 12 bps year over year.
Capital & Profitability Ratios Mixed
At the end of the third quarter, the common equity tier 1 risk-based capital ratio was 12.13% compared with 12.73% at the end of the prior-year quarter. Total risk-based capital ratio was 16.26%, up from 15.87%.
Return on average assets on an annualized basis was 0.79%, unchanged from the year-ago quarter. Return on average equity was 13.62%, which increased from 12.47%.
2022 Outlook
Average loans are expected to grow in the high-20s. Average deposit balances are projected to grow in the mid-20s, changed from the prior mentioned high-20s.
NII is anticipated to grow in the low-40s, changed from the prior stated mid-40s growth. NIM is projected to be 2.15-2.25%.
Core fee income (including client investment fees, foreign-exchange fees, credit card fees, deposit service charges, lending-related fees, wealth management and trust fees, and letters of credit fees) is expected to increase at the high-50s percentage rate, up from the prior mentioned mid-50s.
SVB Securities revenues are projected to be $460-$500 million.
Non-interest expenses (excluding merger-related charges) are projected to increase in the low-20s. A total of $30 million worth of pre-tax merger-related charges have already been incurred in the first nine months of 2022 and $5-$10 million is expected to be incurred in the fourth quarter of the year.
Net loan charge-offs are expected to be 0.07-0.12% of average total loans, changed from the prior mentioned 0.15-0.35%.
The effective tax rate is expected to be 25-27%.
Our Take
Given its global diversification efforts, SVB Financial remains well-positioned for growth. The acquisitions of Boston Private, MoffettNathanson and the debt investment business of WestRiver Group are expected to help the company further cement its foothold in the innovation economy. However, the continuous increase in expenses will likely hurt the bottom line to some extent in the near term.
SVB Financial Group Price, Consensus and EPS Surprise
SVB Financial Group price-consensus-eps-surprise-chart | SVB Financial Group Quote
SVB Financial currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Banks
Hancock Whitney Corporation’s (HWC - Free Report) third-quarter 2022 earnings of $1.55 per share were in line with the Zacks Consensus Estimate. The bottom line rose 6.9% from the prior-year quarter’s adjusted earnings of $1.45.
Results benefited from higher net interest income, a rise in loan balance and increasing rates. However, lower non-interest income mainly due to rising mortgage rates was the undermining factor. Higher adjusted expenses and a rise in provisions were the other headwinds for HWC.
Washington Federal’s (WAFD - Free Report) fourth-quarter fiscal 2022 (ended Sep 30) earnings of $1.07 per share handily surpassed the Zacks Consensus Estimate of 91 cents. The figure reflects a year-over-year jump of 48.6%.
Results were primarily aided by higher rates, robust deposits and improving loan balances, which drove net interest income. However, an increase in expenses, a fall in total other income and higher provisions were the headwinds for WAFD.