A month has gone by since the last earnings report for SVB Financial . Shares have added about 18.6% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is SVB due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
SVB Financial Q4 Earnings Beat, Revenues & Expenses Up
SVB Financial’s fourth-quarter 2020 earnings per share of $7.40 comfortably surpassed the Zacks Consensus Estimate of $3.75. Also, the bottom line increased 46.2% year over year.
Results largely benefited from higher revenues, and improving loan and deposit balances. Also, provision benefit acted as a tailwind. However, increase in operating expenses and contracting net interest margin (NIM) were the undermining factors.
Net income available to common shareholders was $388.3 million, jumping 47.7% from the prior-year quarter.
For 2020, earnings per share of $22.87 surpassed the Zacks Consensus Estimate of $19.21. Also, the figure improved 5.2% from the previous year. Net income was $1.19 billion, up 4.8% year over year.
Revenues & Expenses Rise
Net revenues for the reported quarter were $1.21 billion, increasing 43.2% year over year. Also, the top line beat the Zacks Consensus Estimate of $863.4 million.
For the year, net revenues of $4.00 billion increased 20.4% year over year. The figure surpassed the Zacks Consensus Estimate of $3.64 billion.
Quarterly net interest income (NII) was $591.5 million, which grew 10.8% year over year. Further, NIM (on a fully-taxable equivalent basis) contracted 86 basis points (bps) to 2.40%.
Non-interest income was $621.8 million, which jumped 98.5% year over year. The upswing primarily resulted from a drastic improvement in investment banking revenues, net gains on investment securities and net gains on equity warrant assets.
Non-interest expenses increased 44.3% from the prior-year quarter to $664.8 million. Increase in all expense components, except for business development and travel costs, resulted in the rise.
Non-GAAP core operating efficiency ratio was 62.67%, up from 53.78% in the prior-year quarter. A rise in efficiency ratio indicates lower profitability.
Loans and Deposit Balances Increase
As of Dec 31, 2020, SVB Financial’s total loans amounted to $45.18 billion, increasing 17.6% from the prior quarter, while total deposits jumped 20.3% to $101.98 billion.
Credit Quality: Mixed Bag
Provision for credit losses was a benefit of $38.4 million against provision of $17.4 million in the year-ago quarter. Also, the ratio of net charge-offs to average loans was 0.09%, down 9 bps year over year.
However, the ratio of allowance for loan losses to total loans was 0.99%, up 8 bps year over year.
Capital Ratios Decline, Profitability Ratios Mixed
At the fourth quarter end, common equity tier 1 risk-based capital ratio was 11.04% compared with 12.58% at the end of the prior-year quarter. Total risk-based capital ratio was 12.65% as of Dec 31, 2020, down from 14.23%.
Return on average assets on an annualized basis was 1.49%, down from 1.51% recorded in the year-ago quarter. However, return on average equity was 20.23%, which increased from 17.03%.
2021 Outlook
Average loans are expected to grow in the mid-20s range.
Moreover, average deposit balances are projected to grow in the mid-40s range. Total cost of deposits and share of interest-bearing deposits are expected to remain steady.
NII is anticipated to grow in the low-20s range. NIM is projected to be 2.20-2.30%, down from 2.67% in 2020.
Core fee income (including client investment fees, foreign exchange fees, credit card fees, deposit service charges, lending-related fees and letters of credit fees) is expected to be stable year over year. SVB Leerink revenues are projected to be in the $320-$360 million range, down from $481 million in 2020.
Non-interest expenses (excluding costs related to non-controlling interests) are projected to increase in low-single digits.
Net loan charge-offs are expected to be 0.20-0.40% of average total loans.
The effective tax rate is expected to be 26-28%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 18.56% due to these changes.
VGM Scores
At this time, SVB has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. However, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise SVB has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
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SVB (SIVB) Up 18.6% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for SVB Financial . Shares have added about 18.6% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is SVB due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
SVB Financial Q4 Earnings Beat, Revenues & Expenses Up
SVB Financial’s fourth-quarter 2020 earnings per share of $7.40 comfortably surpassed the Zacks Consensus Estimate of $3.75. Also, the bottom line increased 46.2% year over year.
Results largely benefited from higher revenues, and improving loan and deposit balances. Also, provision benefit acted as a tailwind. However, increase in operating expenses and contracting net interest margin (NIM) were the undermining factors.
Net income available to common shareholders was $388.3 million, jumping 47.7% from the prior-year quarter.
For 2020, earnings per share of $22.87 surpassed the Zacks Consensus Estimate of $19.21. Also, the figure improved 5.2% from the previous year. Net income was $1.19 billion, up 4.8% year over year.
Revenues & Expenses Rise
Net revenues for the reported quarter were $1.21 billion, increasing 43.2% year over year. Also, the top line beat the Zacks Consensus Estimate of $863.4 million.
For the year, net revenues of $4.00 billion increased 20.4% year over year. The figure surpassed the Zacks Consensus Estimate of $3.64 billion.
Quarterly net interest income (NII) was $591.5 million, which grew 10.8% year over year. Further, NIM (on a fully-taxable equivalent basis) contracted 86 basis points (bps) to 2.40%.
Non-interest income was $621.8 million, which jumped 98.5% year over year. The upswing primarily resulted from a drastic improvement in investment banking revenues, net gains on investment securities and net gains on equity warrant assets.
Non-interest expenses increased 44.3% from the prior-year quarter to $664.8 million. Increase in all expense components, except for business development and travel costs, resulted in the rise.
Non-GAAP core operating efficiency ratio was 62.67%, up from 53.78% in the prior-year quarter. A rise in efficiency ratio indicates lower profitability.
Loans and Deposit Balances Increase
As of Dec 31, 2020, SVB Financial’s total loans amounted to $45.18 billion, increasing 17.6% from the prior quarter, while total deposits jumped 20.3% to $101.98 billion.
Credit Quality: Mixed Bag
Provision for credit losses was a benefit of $38.4 million against provision of $17.4 million in the year-ago quarter. Also, the ratio of net charge-offs to average loans was 0.09%, down 9 bps year over year.
However, the ratio of allowance for loan losses to total loans was 0.99%, up 8 bps year over year.
Capital Ratios Decline, Profitability Ratios Mixed
At the fourth quarter end, common equity tier 1 risk-based capital ratio was 11.04% compared with 12.58% at the end of the prior-year quarter. Total risk-based capital ratio was 12.65% as of Dec 31, 2020, down from 14.23%.
Return on average assets on an annualized basis was 1.49%, down from 1.51% recorded in the year-ago quarter. However, return on average equity was 20.23%, which increased from 17.03%.
2021 Outlook
Average loans are expected to grow in the mid-20s range.
Moreover, average deposit balances are projected to grow in the mid-40s range. Total cost of deposits and share of interest-bearing deposits are expected to remain steady.
NII is anticipated to grow in the low-20s range. NIM is projected to be 2.20-2.30%, down from 2.67% in 2020.
Core fee income (including client investment fees, foreign exchange fees, credit card fees, deposit service charges, lending-related fees and letters of credit fees) is expected to be stable year over year. SVB Leerink revenues are projected to be in the $320-$360 million range, down from $481 million in 2020.
Non-interest expenses (excluding costs related to non-controlling interests) are projected to increase in low-single digits.
Net loan charge-offs are expected to be 0.20-0.40% of average total loans.
The effective tax rate is expected to be 26-28%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 18.56% due to these changes.
VGM Scores
At this time, SVB has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. However, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise SVB has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.