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SVB Financial's (SIVB) Ratings Affirmed by Moody's, Outlook Stable
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SVB Financial Group’s ratings and assessments have been affirmed by Moody’s Investors Service, a rating arm of Moody’s Corporation (MCO - Free Report) , following the Boston Private Financial Holdings, Inc. acquisition announcement.
SVB Financial’s long-term senior unsecured debt rating has been affirmed at A3. Along with SVB Financial, its banking arm Silicon Valley Bank's ratings have been affirmed. Silicon Valley Bank's long-term deposit rating has been affirmed at Aa3, while its long-term issuer rating has been affirmed at A3. Additionally, its standalone baseline credit assessment (“BCA”) is a2.
The rating outlook for both SVB Financial and Silicon Valley Bank remains stable.
Reason for Ratings Affirmation
The ratings affirmation followed SVB Financial’s announcement that it will acquire Boston Private in a stock-cum-cash deal valued at $900 million. The deal, projected to close by mid-2021, is expected to further strengthen SVB Financial’s private bank and wealth management offerings.
Boston, MA-based Boston Private offers a wide range of wealth, trust and private banking services, which help clients to simplify and strengthen their financial positions. Therefore, the deal will significantly improve SVB Financial’s ability to meet all the financial needs of its clients. Further, the adoption of Boston Private’s digital platforms will accelerate SVB Financial’s technology development.
Moody’s affirmed the ratings because it believes that the deal will not materially change SVB Financial’s credit profile, which is stronger in comparison to peers. Notably, its credit profile is positioned one notch above the U.S. bank median.
Moreover, SVB Financial’s loan portfolio currently lacks diversification as it is significantly concentrated in sectors like venture capital, private equity, technology and life science, which accounted for almost 81% of its total loan portfolio as of Sep 30, 2020. Thus, the acquisition, which will add Boston Private’s sizeable amount of assets under management to SVB Financial’s comparatively small wealth management business, will support loan diversification and hence aid revenue growth, in turn, promoting SVB Financial’s credit profile.
Notably, Boston Private’s total loan portfolio has a relatively higher concentration of commercial real estate (“CRE”) loans. However, post-acquisition, SVB Financial’s CRE loan portfolio is expected to remain small at an estimated 0.4X its pro forma Moody's-calculated tangible common equity base.
Nevertheless, Moody’s is of the opinion that the deal will lead to a modest reduction to SVB Financial’s capital and liquidity ratios.
What Could Lead to a Rating Upgrade?
SVB Financial’s ratings could be upgraded if there is meaningfully slower loan growth, and reduced sector and borrower concentrations, provided its strong financial fundamentals are maintained.
When Can Ratings be Downgraded?
Downward pressure on ratings could arise if there are any mistakes in the integration of Boston Private or if there is a sustained decline in SVB Financial’s capitalization or liquidity position that is inconsistent with Moody's current expectations.
Over the past year, shares of SVB Financial have gained 54.2% compared with 6.4% growth recorded by the industry it belongs to.
Recently, Moody’s affirmed the ratings for many finance companies. A couple of them are Signature Bank and Huntington Bancshares (HBAN - Free Report) . While the outlook for Signature Bank was lowered to stable, the same for Huntington Bancshares was affirmed at stable.
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SVB Financial's (SIVB) Ratings Affirmed by Moody's, Outlook Stable
SVB Financial Group’s ratings and assessments have been affirmed by Moody’s Investors Service, a rating arm of Moody’s Corporation (MCO - Free Report) , following the Boston Private Financial Holdings, Inc. acquisition announcement.
SVB Financial’s long-term senior unsecured debt rating has been affirmed at A3. Along with SVB Financial, its banking arm Silicon Valley Bank's ratings have been affirmed. Silicon Valley Bank's long-term deposit rating has been affirmed at Aa3, while its long-term issuer rating has been affirmed at A3. Additionally, its standalone baseline credit assessment (“BCA”) is a2.
The rating outlook for both SVB Financial and Silicon Valley Bank remains stable.
Reason for Ratings Affirmation
The ratings affirmation followed SVB Financial’s announcement that it will acquire Boston Private in a stock-cum-cash deal valued at $900 million. The deal, projected to close by mid-2021, is expected to further strengthen SVB Financial’s private bank and wealth management offerings.
Boston, MA-based Boston Private offers a wide range of wealth, trust and private banking services, which help clients to simplify and strengthen their financial positions. Therefore, the deal will significantly improve SVB Financial’s ability to meet all the financial needs of its clients. Further, the adoption of Boston Private’s digital platforms will accelerate SVB Financial’s technology development.
Moody’s affirmed the ratings because it believes that the deal will not materially change SVB Financial’s credit profile, which is stronger in comparison to peers. Notably, its credit profile is positioned one notch above the U.S. bank median.
Moreover, SVB Financial’s loan portfolio currently lacks diversification as it is significantly concentrated in sectors like venture capital, private equity, technology and life science, which accounted for almost 81% of its total loan portfolio as of Sep 30, 2020. Thus, the acquisition, which will add Boston Private’s sizeable amount of assets under management to SVB Financial’s comparatively small wealth management business, will support loan diversification and hence aid revenue growth, in turn, promoting SVB Financial’s credit profile.
Notably, Boston Private’s total loan portfolio has a relatively higher concentration of commercial real estate (“CRE”) loans. However, post-acquisition, SVB Financial’s CRE loan portfolio is expected to remain small at an estimated 0.4X its pro forma Moody's-calculated tangible common equity base.
Nevertheless, Moody’s is of the opinion that the deal will lead to a modest reduction to SVB Financial’s capital and liquidity ratios.
What Could Lead to a Rating Upgrade?
SVB Financial’s ratings could be upgraded if there is meaningfully slower loan growth, and reduced sector and borrower concentrations, provided its strong financial fundamentals are maintained.
When Can Ratings be Downgraded?
Downward pressure on ratings could arise if there are any mistakes in the integration of Boston Private or if there is a sustained decline in SVB Financial’s capitalization or liquidity position that is inconsistent with Moody's current expectations.
Over the past year, shares of SVB Financial have gained 54.2% compared with 6.4% growth recorded by the industry it belongs to.
Currently, the company carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Rating Actions by Moody’s on Other Banks
Recently, Moody’s affirmed the ratings for many finance companies. A couple of them are Signature Bank and Huntington Bancshares (HBAN - Free Report) . While the outlook for Signature Bank was lowered to stable, the same for Huntington Bancshares was affirmed at stable.
Breakout Biotech Stocks with Triple-Digit Profit Potential
The biotech sector is projected to surge beyond $775 billion by 2024 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases.
Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Our recent biotech recommendations have produced gains of +50%, +83% and +164% in as little as 2 months. The stocks in this report could perform even better.
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