A month has gone by since the last earnings report for SVB Financial Group . Shares have added nearly 6% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock’s next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
SVB Financial Beats on Q4 Earnings, Revenues Rise
SVB Financial reported fourth-quarter 2016 earnings per share of $1.89, which handily outpaced the Zacks Consensus Estimate of $1.76. Further, the bottom line compared favorably with the year-ago figure of $1.68.
Better-than-expected quarterly results were primarily driven by higher net interest income (NII) and a significant decline in provisions for loan losses. Also, loan and deposit balances showed decent strength, while credit quality witnessed improvement. However, higher non-interest expense and a slight fall in non-interest income remained headwinds.
Net income available to stockholders amounted to $99.5 million, up 13.7% year over year.
For 2016, earnings of $7.31 per share beat the Zacks Consensus Estimate of $7.08. Also, the figure rose 10.4% year over year. Net income available to stockholders was $382.7 million, increasing 11.3% from the 2015 level.
Net interest Income Rises, Costs Up
SVB Financial’s net revenue for the quarter was $410.1 million, up 6.9% year over year. However, it lagged the Zacks Consensus Estimate of $413.2 million.
For 2016, net revenue was $1.61 billion, in line with the Zacks Consensus Estimate. Also, the figure was 8.6% above the year-ago level.
NII grew 10.2% year over year to $296.6 million. Also, net interest margin (NIM), on a fully taxable equivalent basis, increased 19 basis points (bps) year over year to 2.73%.
Non-interest income of $113.5 million declined marginally year over year.
Non-interest expense rose 7.2% year over year to $244.6 million. A rise in all expense components except business development and travel and correspondent bank fees led to this increase.
Non-GAAP operating efficiency ratio increased to 59.63% from 54.39% in the prior-year quarter. A rise in efficiency ratio indicates lower profitability
Strong Balance Sheet
As of Dec 31, 2016, SVB Financial’s net loans amounted to $19.9 billion, up 4.1% from the prior quarter, while total deposits rose 2.1% to $39.0 billion.
Improved Asset Quality
The ratio of allowance for loan losses to total gross loans came in at 1.13%, down 16 bps year over year. Also, provision for loan losses plunged 77.3% year over year to $7.1 million.
However, the ratio of net charge-offs to average gross loans came in at 0.44%, up 16 bps year over year.
Profitability and Capital Ratios Show Strength
As of Dec 31, 2016, Tier 1 risk-based capital ratio came in at 12.80% compared with 12.28% as of Dec 31, 2015. Total risk-based capital ratio came in at 14.21% compared with 13.84% as of Dec 31, 2015.
Further, non-GAAP return on average assets on an annualized basis improved to 0.88% from 0.80% in the year-ago quarter. Also, non-GAAP return on average equity was 10.77%, up from 10.74% in the prior-year quarter.
2017 Outlook
SVB Financial provided updated 2017 guidance based on the assumption of no change in interest rate during the year. Average loan balance is expected to grow at a percentage rate in the high teens. Further, average deposit balance is projected to rise in the mid- to high-single digits rate.
Further, NII is expected to rise at a percentage rate in the low teens, while NIM is anticipated in a range of 2.80–3.00%.
Moreover, the company anticipates core fee income, including foreign exchange fees, deposit service charges, credit card fees, lending related fees, client investment fees as well as letters of credit fees, to increase at a percentage rate in the high teens.
Further, non-interest expense, net of non-controlling interests, is projected to increase at a high-single digits percentage rate.
On the credit quality front, net loan charge-offs are expected within 0.30–0.50% of average total gross loans. Allowance for loan losses for total gross performing loans, as a percentage of total gross performing loans, is expected to remain flat year over year.
Non-performing loans, as a percentage of total gross loans, are anticipated within 0.50–0.70%.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a upward trend in fresh estimates. There has been one revision higher for the current quarter.
VGM Scores
At this time, SVB Financial stock has a poor Growth Score of 'F', however its Momentum is doing a bit better with a 'C'. Following the similar course, the stock was allocated also a grade of 'D' on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stocks has an aggregte VGM Score of 'F'. If you aren't focused on one strategy, this score is the one you should be interested in.
Zacks' style scores indicate that the company's stock is suitable solely for momentum investors.
Outlook
Estimates have been trending upward for the stock. The magnitude of these revisions also looks promising. The stock has a Zacks Rank #2 (Buy). We are expecting an above average return from the stock in the next few months.
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Why Is SVB Financial (SIVB) Up 6% Since the Last Earnings Report?
A month has gone by since the last earnings report for SVB Financial Group . Shares have added nearly 6% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock’s next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
SVB Financial Beats on Q4 Earnings, Revenues Rise
SVB Financial reported fourth-quarter 2016 earnings per share of $1.89, which handily outpaced the Zacks Consensus Estimate of $1.76. Further, the bottom line compared favorably with the year-ago figure of $1.68.
Better-than-expected quarterly results were primarily driven by higher net interest income (NII) and a significant decline in provisions for loan losses. Also, loan and deposit balances showed decent strength, while credit quality witnessed improvement. However, higher non-interest expense and a slight fall in non-interest income remained headwinds.
Net income available to stockholders amounted to $99.5 million, up 13.7% year over year.
For 2016, earnings of $7.31 per share beat the Zacks Consensus Estimate of $7.08. Also, the figure rose 10.4% year over year. Net income available to stockholders was $382.7 million, increasing 11.3% from the 2015 level.
Net interest Income Rises, Costs Up
SVB Financial’s net revenue for the quarter was $410.1 million, up 6.9% year over year. However, it lagged the Zacks Consensus Estimate of $413.2 million.
For 2016, net revenue was $1.61 billion, in line with the Zacks Consensus Estimate. Also, the figure was 8.6% above the year-ago level.
NII grew 10.2% year over year to $296.6 million. Also, net interest margin (NIM), on a fully taxable equivalent basis, increased 19 basis points (bps) year over year to 2.73%.
Non-interest income of $113.5 million declined marginally year over year.
Non-interest expense rose 7.2% year over year to $244.6 million. A rise in all expense components except business development and travel and correspondent bank fees led to this increase.
Non-GAAP operating efficiency ratio increased to 59.63% from 54.39% in the prior-year quarter. A rise in efficiency ratio indicates lower profitability
Strong Balance Sheet
As of Dec 31, 2016, SVB Financial’s net loans amounted to $19.9 billion, up 4.1% from the prior quarter, while total deposits rose 2.1% to $39.0 billion.
Improved Asset Quality
The ratio of allowance for loan losses to total gross loans came in at 1.13%, down 16 bps year over year. Also, provision for loan losses plunged 77.3% year over year to $7.1 million.
However, the ratio of net charge-offs to average gross loans came in at 0.44%, up 16 bps year over year.
Profitability and Capital Ratios Show Strength
As of Dec 31, 2016, Tier 1 risk-based capital ratio came in at 12.80% compared with 12.28% as of Dec 31, 2015. Total risk-based capital ratio came in at 14.21% compared with 13.84% as of Dec 31, 2015.
Further, non-GAAP return on average assets on an annualized basis improved to 0.88% from 0.80% in the year-ago quarter. Also, non-GAAP return on average equity was 10.77%, up from 10.74% in the prior-year quarter.
2017 Outlook
SVB Financial provided updated 2017 guidance based on the assumption of no change in interest rate during the year. Average loan balance is expected to grow at a percentage rate in the high teens. Further, average deposit balance is projected to rise in the mid- to high-single digits rate.
Further, NII is expected to rise at a percentage rate in the low teens, while NIM is anticipated in a range of 2.80–3.00%.
Moreover, the company anticipates core fee income, including foreign exchange fees, deposit service charges, credit card fees, lending related fees, client investment fees as well as letters of credit fees, to increase at a percentage rate in the high teens.
Further, non-interest expense, net of non-controlling interests, is projected to increase at a high-single digits percentage rate.
On the credit quality front, net loan charge-offs are expected within 0.30–0.50% of average total gross loans. Allowance for loan losses for total gross performing loans, as a percentage of total gross performing loans, is expected to remain flat year over year.
Non-performing loans, as a percentage of total gross loans, are anticipated within 0.50–0.70%.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a upward trend in fresh estimates. There has been one revision higher for the current quarter.
SVB Financial Group Price and Consensus
SVB Financial Group Price and Consensus | SVB Financial Group Quote
VGM Scores
At this time, SVB Financial stock has a poor Growth Score of 'F', however its Momentum is doing a bit better with a 'C'. Following the similar course, the stock was allocated also a grade of 'D' on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stocks has an aggregte VGM Score of 'F'. If you aren't focused on one strategy, this score is the one you should be interested in.
Zacks' style scores indicate that the company's stock is suitable solely for momentum investors.
Outlook
Estimates have been trending upward for the stock. The magnitude of these revisions also looks promising. The stock has a Zacks Rank #2 (Buy). We are expecting an above average return from the stock in the next few months.