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Why is Q3 Earnings Beat Less Likely for SVB Financial (SIVB)?
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SVB Financial Group is scheduled to report third-quarter 2022 results on Oct 20, after market close. The company largely caters to start-ups, venture capital and private equity communities. The demand for loans from such niche sectors remained decent in the to-be-reported quarter.
Hence, SIVB is expected to have witnessed growth in total loan balances. The Zacks Consensus Estimate for average total interest-earning assets is pegged at $208.1 billion, suggesting a rise of 19% from the prior-year quarter’s reported number.
Thus, supported by higher loan demand and the hike in interest rates during the quarter (the Federal Reserve raised interest rates by another 150 basis points), SVB Financial’s net interest income (NII) is likely to have improved. The consensus estimate for NII (on a tax-equivalent basis) is pegged at $1.22 billion, implying year-over-year growth of 42.4%.
Other Major Factors and Estimates for Q3
Non-Interest Income: While rising inflation hurt consumer sentiments in the third quarter, pent-up demand is expected to have driven consumers toward card use. Thus, this likely had a positive impact on SIVB’s card business. The Zacks Consensus Estimate for credit card fees of $42.23 million suggests year-over-year growth of 24.2%.
The consensus estimate for deposit service charges is pegged at $33.48 million, indicating a 15.4% rise. The Zacks Consensus Estimate for client investment fees of $109 million suggests a significant jump from the prior-year quarter’s reported figure.
A decent rise in loan demand is expected to have offered support to SVB Financial’s lending-related fees. The Zacks Consensus Estimate for the same of $25.50 million indicates a 21.4% rise from the prior-year quarter.
The Zacks Consensus Estimate for foreign exchange fees is pegged at $72 million, suggesting a rise of 10.8%.
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 $317 million indicates a year-over-year jump of 55.4%.
Amid the weakness in the capital markets and an industry-wide slowdown in deal-making, SIVB is expected to have recorded a fall in investment banking fees. The Zacks Consensus Estimate for the same is pegged at $80 million, suggesting a year-over-year fall of 11.1%. The consensus estimate for commissions of $22.59 million indicates a rise of 32.9%.
The consensus estimate for total non-interest income of $474 million implies a 29.5% decrease from the prior-year quarter’s reported number.
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 are expected to have been incurred. Thus, overall costs are likely to have increased in the to-be-reported quarter.
Credit Quality: With the rise in loan demand and expectations of economic slowdown due to geopolitical and macroeconomic concerns, SIVB is anticipated to have increased provisions in the third quarter.
The Zacks Consensus Estimate for total non-performing assets of $102 million suggests a year-over-year decline of 13.6%. The consensus estimate for total non-performing loans of $100 million implies a fall of 14.5%.
What the Zacks Model Unveils
Per 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.
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 -1.78%.
Zacks Rank: The company currently carries a Zacks Rank #3.
The Zacks Consensus Estimate for the company’s third-quarter earnings is pegged at $6.91 per share, which has moved marginally lower over the past seven days. The figure indicates a year-over-year decline of 4.8%.
The consensus estimate for sales of $1.59 billion suggests growth of 3.9% from the prior-year quarter’s reported number.
A couple of 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 Associated BancCorp (ASB - Free Report) and BankUnited (BKU - Free Report) .
The Earnings ESP for Associated BancCorp is +0.57% and it carries a Zacks Rank #3 at present. The company is slated to report third-quarter 2022 results on Oct 20.
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Why is Q3 Earnings Beat Less Likely for SVB Financial (SIVB)?
SVB Financial Group is scheduled to report third-quarter 2022 results on Oct 20, after market close. The company largely caters to start-ups, venture capital and private equity communities. The demand for loans from such niche sectors remained decent in the to-be-reported quarter.
Hence, SIVB is expected to have witnessed growth in total loan balances. The Zacks Consensus Estimate for average total interest-earning assets is pegged at $208.1 billion, suggesting a rise of 19% from the prior-year quarter’s reported number.
Thus, supported by higher loan demand and the hike in interest rates during the quarter (the Federal Reserve raised interest rates by another 150 basis points), SVB Financial’s net interest income (NII) is likely to have improved. The consensus estimate for NII (on a tax-equivalent basis) is pegged at $1.22 billion, implying year-over-year growth of 42.4%.
Other Major Factors and Estimates for Q3
Non-Interest Income: While rising inflation hurt consumer sentiments in the third quarter, pent-up demand is expected to have driven consumers toward card use. Thus, this likely had a positive impact on SIVB’s card business. The Zacks Consensus Estimate for credit card fees of $42.23 million suggests year-over-year growth of 24.2%.
The consensus estimate for deposit service charges is pegged at $33.48 million, indicating a 15.4% rise. The Zacks Consensus Estimate for client investment fees of $109 million suggests a significant jump from the prior-year quarter’s reported figure.
A decent rise in loan demand is expected to have offered support to SVB Financial’s lending-related fees. The Zacks Consensus Estimate for the same of $25.50 million indicates a 21.4% rise from the prior-year quarter.
The Zacks Consensus Estimate for foreign exchange fees is pegged at $72 million, suggesting a rise of 10.8%.
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 $317 million indicates a year-over-year jump of 55.4%.
Amid the weakness in the capital markets and an industry-wide slowdown in deal-making, SIVB is expected to have recorded a fall in investment banking fees. The Zacks Consensus Estimate for the same is pegged at $80 million, suggesting a year-over-year fall of 11.1%. The consensus estimate for commissions of $22.59 million indicates a rise of 32.9%.
The consensus estimate for total non-interest income of $474 million implies a 29.5% decrease from the prior-year quarter’s reported number.
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 are expected to have been incurred. Thus, overall costs are likely to have increased in the to-be-reported quarter.
Credit Quality: With the rise in loan demand and expectations of economic slowdown due to geopolitical and macroeconomic concerns, SIVB is anticipated to have increased provisions in the third quarter.
The Zacks Consensus Estimate for total non-performing assets of $102 million suggests a year-over-year decline of 13.6%. The consensus estimate for total non-performing loans of $100 million implies a fall of 14.5%.
What the Zacks Model Unveils
Per 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.
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 -1.78%.
Zacks Rank: The company currently carries a Zacks Rank #3.
The Zacks Consensus Estimate for the company’s third-quarter earnings is pegged at $6.91 per share, which has moved marginally lower over the past seven days. The figure indicates a year-over-year decline of 4.8%.
The consensus estimate for sales of $1.59 billion suggests growth of 3.9% from the prior-year quarter’s reported number.
SVB Financial Group Price and EPS Surprise
SVB Financial Group price-eps-surprise | SVB Financial Group Quote
Stocks to Consider
A couple of 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 Associated BancCorp (ASB - Free Report) and BankUnited (BKU - Free Report) .
The Earnings ESP for Associated BancCorp is +0.57% and it carries a Zacks Rank #3 at present. The company is slated to report third-quarter 2022 results on Oct 20.
BankUnited is also scheduled to release third-quarter 2022 earnings on Oct 20. The company, which carries a Zacks Rank #3 at present, has an Earnings ESP of +1.32%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.