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SVB Financial Group’s fourth-quarter 2022 earnings per share of $4.62 lagged the Zacks Consensus Estimate of $5.26. The bottom line reflects a decline of 25.7% from the prior-year quarter.
Results were primarily hurt by an increase in expenses and provisions. A decline in non-interest income was another undermining factor. However, an improvement in net interest income (NII), driven by higher rates and loan growth, supported the results to some extent.
Net income available to common shareholders was $275 million, down 25.9% from the prior-year quarter.
For 2022, earnings per share of $25.35 missed the Zacks Consensus Estimate of $25.97. The bottom line reflects a decline of 18.9% from the previous year. Net income available to common shareholders was $1.51 billion, down 14.7% year over year.
Revenues Improve, Expenses Rise
Quarterly net revenues (tax-equivalent) were $1.54 billion, up 1.9% year over year. The top line beat the Zacks Consensus Estimate of $1.49 billion.
Net revenues (tax-equivalent) for 2022 were $6.25 billion, up 5.1% year over year. The top line surpassed the Zacks Consensus Estimate of $6.20 billion.
Quarterly NII was $1.04 billion, which grew 10.5% year over year. NIM (on a fully-taxable equivalent basis) expanded 9 basis points (bps) year over year to 2%.
Non-interest income was $490 million, down 12.7% from the prior-year quarter. The fall resulted from a decline in net gains on equity warrant assets, wealth management and trust fees, foreign exchange fees, and credit card fees. In the reported quarter, the company recorded a net loss on investment securities against a gain in the year-ago quarter.
Non-interest expenses increased 11.8% year over year to $1.01 billion. An increase in all expense components, except for merger-related charges, resulted in the rise.
The operating efficiency ratio was 65.97%, up from 60.13% in the prior-year quarter. A rise in the efficiency ratio indicates a deterioration in profitability.
Loan Balances Rise, Deposits Decline
As of Dec 31, 2022, SVB Financial’s total loans amounted to $74.25 billion, increasing 2.9% from the prior quarter. Total deposits declined 2.1% sequentially to $173.11 billion.
Credit Quality Worsens
In the reported quarter, the company recorded a provision for credit losses of $141 million, up significantly from $48 million in the prior-year quarter. The ratio of net charge-offs to average loans was 0.15%, up from 0.01% in the year-earlier quarter.
The ratio of allowance for loan losses to total loans was 0.86%, up 22 bps year over year.
Capital & Profitability Ratios Worsen
At the end of the fourth quarter, the common equity tier 1 risk-based capital ratio was 12.09%, unchanged from the end of the prior-year quarter. Total risk-based capital ratio was 16.22%, down from 16.58%.
Return on average assets on an annualized basis was 0.51%, down from 0.72% in the year-ago quarter. Return on average equity was 8.93%, which decreased from 11.80%.
2023 Outlook
Average loans are expected to grow in the low-double digits. Average deposit balances are projected to decline at a mid-single-digit rate.
NII is anticipated to witness a high-teens decline. NIM is projected to be 1.75-1.85%.
Core fee income (including client investment fees, foreign-exchange fees, credit card fees, deposit service charges, lending-related fees, wealth management and trust fees, and letters of credit fees) is expected to increase at the low-teens rate.
SVB Securities revenues are projected to be $540-$590 million.
Non-interest expenses (excluding merger-related charges) are projected to increase at a low-single-digit rate. Pre-tax charges related to the acquisition of Boston Private were $50 million in 2022. Charges of $5-$10 million and $10-$15 million are expected in the first quarter and 2023, respectively.
Net loan charge-offs are expected to be 0.15-0.35% of average total loans.
The effective tax rate is expected to be 26-28%.
Our Take
Given its global diversification efforts, SVB Financial is well-positioned for growth. Given the rise in interest rates and higher loan demand, the company’s interest income is expected to continue to improve in the near term. However, the continuous increase in expenses will likely hurt its bottom line to some extent.
SVB Financial Group Price, Consensus and EPS Surprise
Hancock Whitney Corporation’s (HWC - Free Report) fourth-quarter 2022 earnings of $1.65 per share surpassed the Zacks Consensus Estimate of $1.63. The bottom line rose 6.5% from the prior-year quarter’s earnings of $1.55.
HWC’s results benefited from higher net interest income, supported by a rise in loan balance and increasing interest rates. However, lower non-interest income mainly due to higher mortgage rates was the undermining factor. Higher expenses and a rise in provisions were other concerns for HWC.
The PNC Financial Services Group, Inc.’s (PNC - Free Report) fourth-quarter 2022 adjusted earnings per share of $3.49 lagged the Zacks Consensus Estimate of $3.95. Also, the bottom line declined 5.2% year over year.
PNC’s results were primarily hurt by a decline in non-interest income and higher provisions. However, an increase in net interest income, supported by higher rates and loan growth, and a decline in expenses were tailwinds for PNC.
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SVB Financial (SIVB) Q4 Earnings Miss, Provisions & Costs Rise
SVB Financial Group’s fourth-quarter 2022 earnings per share of $4.62 lagged the Zacks Consensus Estimate of $5.26. The bottom line reflects a decline of 25.7% from the prior-year quarter.
Results were primarily hurt by an increase in expenses and provisions. A decline in non-interest income was another undermining factor. However, an improvement in net interest income (NII), driven by higher rates and loan growth, supported the results to some extent.
Net income available to common shareholders was $275 million, down 25.9% from the prior-year quarter.
For 2022, earnings per share of $25.35 missed the Zacks Consensus Estimate of $25.97. The bottom line reflects a decline of 18.9% from the previous year. Net income available to common shareholders was $1.51 billion, down 14.7% year over year.
Revenues Improve, Expenses Rise
Quarterly net revenues (tax-equivalent) were $1.54 billion, up 1.9% year over year. The top line beat the Zacks Consensus Estimate of $1.49 billion.
Net revenues (tax-equivalent) for 2022 were $6.25 billion, up 5.1% year over year. The top line surpassed the Zacks Consensus Estimate of $6.20 billion.
Quarterly NII was $1.04 billion, which grew 10.5% year over year. NIM (on a fully-taxable equivalent basis) expanded 9 basis points (bps) year over year to 2%.
Non-interest income was $490 million, down 12.7% from the prior-year quarter. The fall resulted from a decline in net gains on equity warrant assets, wealth management and trust fees, foreign exchange fees, and credit card fees. In the reported quarter, the company recorded a net loss on investment securities against a gain in the year-ago quarter.
Non-interest expenses increased 11.8% year over year to $1.01 billion. An increase in all expense components, except for merger-related charges, resulted in the rise.
The operating efficiency ratio was 65.97%, up from 60.13% in the prior-year quarter. A rise in the efficiency ratio indicates a deterioration in profitability.
Loan Balances Rise, Deposits Decline
As of Dec 31, 2022, SVB Financial’s total loans amounted to $74.25 billion, increasing 2.9% from the prior quarter. Total deposits declined 2.1% sequentially to $173.11 billion.
Credit Quality Worsens
In the reported quarter, the company recorded a provision for credit losses of $141 million, up significantly from $48 million in the prior-year quarter. The ratio of net charge-offs to average loans was 0.15%, up from 0.01% in the year-earlier quarter.
The ratio of allowance for loan losses to total loans was 0.86%, up 22 bps year over year.
Capital & Profitability Ratios Worsen
At the end of the fourth quarter, the common equity tier 1 risk-based capital ratio was 12.09%, unchanged from the end of the prior-year quarter. Total risk-based capital ratio was 16.22%, down from 16.58%.
Return on average assets on an annualized basis was 0.51%, down from 0.72% in the year-ago quarter. Return on average equity was 8.93%, which decreased from 11.80%.
2023 Outlook
Average loans are expected to grow in the low-double digits. Average deposit balances are projected to decline at a mid-single-digit rate.
NII is anticipated to witness a high-teens decline. NIM is projected to be 1.75-1.85%.
Core fee income (including client investment fees, foreign-exchange fees, credit card fees, deposit service charges, lending-related fees, wealth management and trust fees, and letters of credit fees) is expected to increase at the low-teens rate.
SVB Securities revenues are projected to be $540-$590 million.
Non-interest expenses (excluding merger-related charges) are projected to increase at a low-single-digit rate. Pre-tax charges related to the acquisition of Boston Private were $50 million in 2022. Charges of $5-$10 million and $10-$15 million are expected in the first quarter and 2023, respectively.
Net loan charge-offs are expected to be 0.15-0.35% of average total loans.
The effective tax rate is expected to be 26-28%.
Our Take
Given its global diversification efforts, SVB Financial is well-positioned for growth. Given the rise in interest rates and higher loan demand, the company’s interest income is expected to continue to improve in the near term. However, the continuous increase in expenses will likely hurt its bottom line to some extent.
SVB Financial Group Price, Consensus and EPS Surprise
SVB Financial Group price-consensus-eps-surprise-chart | SVB Financial Group Quote
SVB Financial currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Banks
Hancock Whitney Corporation’s (HWC - Free Report) fourth-quarter 2022 earnings of $1.65 per share surpassed the Zacks Consensus Estimate of $1.63. The bottom line rose 6.5% from the prior-year quarter’s earnings of $1.55.
HWC’s results benefited from higher net interest income, supported by a rise in loan balance and increasing interest rates. However, lower non-interest income mainly due to higher mortgage rates was the undermining factor. Higher expenses and a rise in provisions were other concerns for HWC.
The PNC Financial Services Group, Inc.’s (PNC - Free Report) fourth-quarter 2022 adjusted earnings per share of $3.49 lagged the Zacks Consensus Estimate of $3.95. Also, the bottom line declined 5.2% year over year.
PNC’s results were primarily hurt by a decline in non-interest income and higher provisions. However, an increase in net interest income, supported by higher rates and loan growth, and a decline in expenses were tailwinds for PNC.