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Hercules Capital to Witness Rise in NII from Rate Hike

Zacks Equity Research

Hercules Capital, Inc. HTGC has estimated the approximate effect of the recent rate hike on its debt investment portfolio. The company expects a 25 basis point increase in the Prime Rate to contribute 2 cents per share to the annual Net Investment Income (NII) based on its shares outstanding as of Dec 31, 2016.

However, the company doesn’t expect to see any impact of the rate hike on its first quarter NII as the change takes effect almost at the end of the quarter.

Hercules Capital’s debt investment portfolio has a mix of both fixed rate and floating rate securities. As of Dec 31, 2016, 92.1% of its portfolio was primarily priced at PRIME or LIBOR-based floating interest rates. On the other hand, 99.2% of its outstanding debt obligations carry a fixed interest rate.

The company remains well positioned to benefit from any future rate increases, given its diverse mix of debt investment securities. Moreover, Hercules Capital remains focused on making commitments to new and existing companies, keeping its loan origination activity on track. The company is also expected to witness growing demand for customized financing, based on the market optimism for public equities and an improving economic environment.

Notably, shares of the company gained 15.8% in 2016, outperforming the Zacks categorized Small Business Investment Companies & Commercial industry’s growth of 10.9%.



However, elevated expenses owing to the efforts to improve loan originations are expected to hurt bottom line growth in the near term.

Currently, Hercules Capital carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the finance space include Fidelity Southern Corporation LION, Bank of the Ozarks, Inc. OZRK and Synovus Financial Corp. SNV.

Fidelity Southern Corporation witnessed an upward earnings estimate revision of 4.6% for the current year, in the last 60 days. Its share price increased 25.1% in the last six months. It currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Bank of the Ozarks carries a Zacks Rank #2 (Buy). For the current year, in the last 60 days, its Zacks Consensus Estimate was revised 1.3% upward. Its share price increased 41.4% in the last six months.

Synovus Financial also carries a Zacks Rank #2. It has witnessed an upward earnings estimate revision of 3.2% for the current year, in the last 60 days. Its share price increased 28.8% in the last six months.

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Synovus Financial Corp. (SNV): Free Stock Analysis Report
 
Bank of the Ozarks (OZRK): Free Stock Analysis Report
 
Fidelity Southern Corporation (LION): Free Stock Analysis Report
 
Hercules Capital, Inc. (HTGC): Free Stock Analysis Report
 
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