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SVB Financial (SIVB) Beats on Q4 Earnings, Revenues Rise
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SVB Financial Group 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%.
Our Viewpoint
Escalating expenses and stringent regulations are anticipated to dent the company’s performance in the near term. Nonetheless, continuous change in deposit mix and efforts to reduce long-term debt position will make SVB Financial well positioned for future growth. In addition, the company’s enhanced investments will likely boost top-line growth.
SVB Financial Group Price, Consensus and EPS Surprise
Zions Bancorporation (ZION - Free Report) reported fourth-quarter 2016 earnings of 60 cents per share, which handily surpassed the Zacks Consensus Estimate of 52 cents. Better-than-expected results were largely driven by higher revenues and provision benefits. Also, driven by cost saving efforts, the company recorded a marginal fall in operating expenses. However, deteriorating asset quality and capital position remained headwinds.
First Republic Bank’s earnings per share for fourth-quarter 2016 came in at $1.03, beating the Zacks Consensus Estimate by a penny. Higher net interest income and non-interest income during the quarter were primarily responsible for the bottom-line improvement. On the flip side, higher expenses remained a headwind.
Associated Banc-Corp (ASB - Free Report) reported fourth-quarter 2016 earnings per share of 34 cents, outpacing the Zacks Consensus Estimate of 32 cents. Better-than-expected results were primarily driven by an improvement in total revenue and lower provision for credit losses. However, an increase in expenses marginally hurt the results.
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SVB Financial (SIVB) Beats on Q4 Earnings, Revenues Rise
SVB Financial Group 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%.
Our Viewpoint
Escalating expenses and stringent regulations are anticipated to dent the company’s performance in the near term. Nonetheless, continuous change in deposit mix and efforts to reduce long-term debt position will make SVB Financial well positioned for future growth. In addition, the company’s enhanced investments will likely boost top-line growth.
SVB Financial Group Price, Consensus and EPS Surprise
SVB Financial Group Price, Consensus and EPS Surprise | SVB Financial Group Quote
SVB Financial currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Banks
Zions Bancorporation (ZION - Free Report) reported fourth-quarter 2016 earnings of 60 cents per share, which handily surpassed the Zacks Consensus Estimate of 52 cents. Better-than-expected results were largely driven by higher revenues and provision benefits. Also, driven by cost saving efforts, the company recorded a marginal fall in operating expenses. However, deteriorating asset quality and capital position remained headwinds.
First Republic Bank’s earnings per share for fourth-quarter 2016 came in at $1.03, beating the Zacks Consensus Estimate by a penny. Higher net interest income and non-interest income during the quarter were primarily responsible for the bottom-line improvement. On the flip side, higher expenses remained a headwind.
Associated Banc-Corp (ASB - Free Report) reported fourth-quarter 2016 earnings per share of 34 cents, outpacing the Zacks Consensus Estimate of 32 cents. Better-than-expected results were primarily driven by an improvement in total revenue and lower provision for credit losses. However, an increase in expenses marginally hurt the results.
The Best Place to Start Your Stock Search
Today, you are invited to download the full list of 220 Zacks Rank #1 "Strong Buy" stocks – absolutely free of charge. Since 1988, Zacks Rank #1 stocks have nearly tripled the market, with average gains of +26% per year. Plus, you can access the list of portfolio-killing Zacks Rank #5 "Strong Sells" and other private research. See these stocks free >>