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What's in the Cards for SVB Financial (SIVB) in Q4 Earnings?

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SVB Financial Group (SIVB - Free Report) is scheduled to report fourth-quarter and 2021 results on Jan 20, after market close. The company largely caters to the start-up, venture capital and private equity community. The overall demand for loans from such niche sectors continued to improve in the quarter.

Hence, SIVB is expected to have witnessed sizeable growth in total loan balances. The Zacks Consensus Estimate for average total interest-earning assets is pegged at $192.5 billion, suggesting a rise of 10.1% from the prior quarter’s reported number.

Thus, despite the continued low interest-rate environment, SVB Financial’s net interest income (NII) is likely to have increased in the quarter, supported by the increasing loan demand. The consensus estimate for NII (on a tax-equivalent basis) is pegged at $934 million, which implies growth of 8.7% sequentially.

Other Key Factors and Estimates for Q4

Non-Interest Income: The consensus estimate for deposit service charges is pegged at $29.78 million, indicating a 2.7% rise on a sequential basis.

Moreover, as consumer confidence continued to improve, there was an improvement in credit card loans. Thus, the Zacks Consensus Estimate for credit card fees of $35.05 million indicates a rise of 3.1% from the previous quarter’s reported number.

The Zacks Consensus Estimate for client investment fees of $28 million suggests a 40% improvement from the previous quarter’s reported figure.

However, the consensus estimate for lending-related fees of $20.67 million indicates a fall of 1.6% from the prior quarter’s reported number. The Zacks Consensus Estimate for foreign exchange fees is pegged at $67 million, suggesting a rise of 3.1% from the prior-quarter reported level.

Thus, the consensus estimate for core fee income (including client investment fees, foreign exchange fees, credit card fees, deposit service charges, lending-related fees, and letters of credit fees) of $212 million reflects a rise of 3.9% sequentially.

The Zacks Consensus Estimate for investment banking fees of $118 million suggests a rise of 31.1% sequentially. The consensus estimate for commissions of $20.33 million indicates a 19.6% sequential rise.

The consensus estimate for total non-interest income of $502 million reflects a 25.3% decrease sequentially.

Expenses: SVB Financial has been witnessing a continued rise in overall expenses over the past several quarters because of investments in technology upgrades and hiring. As the company has been expanding inorganically, expenses related to these will be incurred. Thus, overall costs are likely to have risen in the to-be-reported quarter.

Notably, 25% of cost savings from the Boston Private merger (completed in July 2021) is anticipated to be realized in 2021.

Credit Quality: The Zacks Consensus Estimate for total non-performing assets of $116 million suggests a fall of 1.7% sequentially. The consensus estimate for total non-performing loans of $128 million suggests a rise of 9.4%.

Management Expectations for 2021 (Including Boston Private Deal)

Average loans are expected to grow in the mid-40s. Average deposit balances are projected to grow in the mid-90s.

NII is anticipated to grow in the mid-40s. Net interest margin is projected to be 2-2.10%.

Core fee income is expected to increase in the low-20s percentage rate.

Non-interest expenses (excluding merger-related charges) are projected to increase in the low-40s.

Net loan charge-offs are expected to be 0.20-0.40% of average total loans.

Key Development in Q4

Continuing with its efforts of expanding into technology investment banking, SVB Financial acquired MoffettNathanson LLC in December 2021, which is a New York-based independent sell-side research firm. MoffettNathanson is known for its coverage of high-growth, disruptive companies in the media, communications and technology sectors.

MoffettNathanson was founded in 2013. Since then, it has been considered the standard-bearer for technology equity research. With the acquisition, SVB Leerink (which used to provide investment banking services across healthcare sectors) has been able to expand its research coverage beyond healthcare to include companies in the technology industry.

What the Zacks Model Unveils

According to our proven model, the chances of SVB Financial beating the Zacks Consensus Estimate this time are low. This is because it does not have the right combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or better — which is required to be confident of an earnings beat.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: The Earnings ESP for SVB Financial is -0.95%.

Zacks Rank: The company currently carries a Zacks Rank #3.

The Zacks Consensus Estimate for the company’s fourth-quarter earnings is pegged at $6.29 per share, which has moved marginally upward over the past seven days. The figure indicates a year-over-year decline of 15%.

SVB Financial Group Price and EPS Surprise

 

SVB Financial Group Price and EPS Surprise

SVB Financial Group price-eps-surprise | SVB Financial Group Quote

The consensus estimate for sales of $1.43 billion suggests growth of 17.7% from the prior-year quarter’s reported number.

Stocks to Consider

A few finance stocks, which you may want to consider as these have the right combination of elements to post an earnings beat in their upcoming releases per our model, are Commerce Bancshares (CBSH - Free Report) , BankUnited (BKU - Free Report) and Prosperity Bancshares (PB - Free Report) .

The Earnings ESP for Commerce Bancshares is +0.71% and it carries a Zacks Rank of 3 at present. CBSH is scheduled to report quarterly numbers on Jan 19.

BankUnited is slated to report quarterly results on Jan 20. BKU currently has an Earnings ESP of +42.98% and a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Prosperity Bancshares is slated to report quarterly earnings on Jan 26. PB, which carries a Zacks Rank of 3 at present, has an Earnings ESP of +0.55%.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.