On Jun 25, 2015, we issued an updated research report on SVB Financial Group SIVB. Sturdy growth in loans and deposits continued to be the main driver, while elevated expenses remained the undermining factor.
The company’s focus on organic growth can be witnessed in the 33% rise in net loans as well as total deposits on a year-over-year basis in the first quarter of 2015. Moreover, the growth momentum is expected to continue with management anticipating average loan balances to augment at a percentage rate in the mid-twenties and average deposit balances to increase at a percentage rate in the low thirties.
Steady loan and deposit growth continue to boost the revenue generation of the company. Though net revenues reflected a decline of 19% in the first quarter of 2015 on account of lower non-interest income, net interest income is expected to rise at a percentage rate in the high teens going forward. This may help lift revenue generation in the upcoming quarters.
On the flip side, SVB Financial continued to struggle with constantly rising expenses. The heightened strain on profitability could be seen in the 15% increase in non-interest expenses in the first quarter of 2015. Moreover, the pressure is expected to build up with management projecting non-interest expense, net of noncontrolling interests, to rise at a rate in the high single digits.
Though escalating expenses, persistent margin compression and stringent regulations are expected to keep financials under strain, SVB Financial’s enhanced investments and sturdy capital position indicate better days ahead. The company’s success in gaining market confidence was evident from the 26.5% year-to-date rise in share price.
This can also be observed in the Zacks Consensus Estimate for 2015, which increased by a penny over the last 30 days. Also, for 2016, the estimate revised 13.2% higher over the same time frame.
Currently, SVB Financial carries a Zacks Rank #2 (Buy). Other Western banks include Bank of Hawaii Corporation BOH, Central Valley Community Bancorp CVCY and Westamerica Bancorp. WABC. All these stocks hold the same rank as SVB Financial.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment