SVB Financial Group (NASDAQ:SIVB) Q4 2022 Earnings Call Transcript

SVB Financial Group (NASDAQ:SIVB) Q4 2022 Earnings Call Transcript January 19, 2023

Operator: Good day. My name is Emma, and I will be your conference operator today. At this time, I would like to welcome everyone to SVB Financial Group Q4 2022 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. . Thank you. Meghan O'Leary, Head of Investor Relations, you may begin your conference.

Meghan O'Leary: Thank you, Emma, and thank you, everyone, for joining us today. Our President and CEO, Greg Becker; and our CFO, Dan Beck are here to talk about our fourth quarter and full year 2022 financial results, and our 2023 outlook and will be joined by other members of our management team for the Q&A. Our current earnings release, highlight slides, and CEO letter have been filed with the SEC and are available on the Investor Relations section of our website. We will be making forward-looking statements during this call and actual results may differ materially. We encourage you to review the disclaimer in our earnings release dealing with forward-looking information, which applies equally to statements made in this call.

In addition, some of our discussion may include references to non-GAAP financial measures. Information about those measures, including reconciliation to GAAP measures may be found in our SEC filings and in our earnings release. And now I will turn the call over to our President and CEO, Greg Becker.

Greg Becker: Great. Thanks, Meghan and thanks everyone for joining us today. Before we go into questions, I just want to briefly comment on kind of our business and the market environment. First, I think it's important to set kind of context. When we continue to see strength and momentum in our business despite the broader market backdrop, which I'll talk about in a minute. We had healthy loan growth across the board driven by global funds, banking technology, and private banking, mortgage lending, we had record core fee income from improved client investment fee margins, we saw healthy investment banking revenue driven by a foreign pharma deal activity, which was great to see. And we had more balanced in client fund flows as client cash burn in the pace of VC investment declined showed signs of moderation, which was obviously very important and welcomed.

And we saw continued strong new client acquisition of approximately 1600 clients in the quarter, which is higher than pre-COVID levels, which is notable. And credit remains solid, although our provision reflects higher net charge-offs and non-performing loans as well as our expectations for deteriorating economic conditions. Now, the markets are still challenging, we admit that and they're likely to remain so throughout 2023. We don't expect any dramatic change from where we are right now. And in fact, even a little bit more pressure in the first couple quarters. So in other words, again, not expecting a dramatic improvement. Global market volatility is significantly reduced private and public investment. In public there's almost, there's a longest time that window has been effectively shut.

And we don't really expect that to change until maybe put a big maybe in the latter half of the year. And there's still a lot of uncertainty over the direction of rates and inflation in the broader economy. And we hear about it pretty much every day in the news and on media. So what does it mean for us for 23? We expect these conditions we'll continue to put pressure on our growth in the first half of 23 with net interest income pressure, somewhat higher provision, although we still expect credit performance will remain good overall, and other headwinds that are kind of come on a daily basis. But in the second half, we expect continued momentum and balance between venture investment and cash burn. And it doesn't as important, and it doesn't take much of improvement.

Photo by Gabrielle Henderson on Unsplash

In fact, no real improvement for where we are on the deployment of dollars. It's more about the cash burn which we again continue to continue to believe is going to be a pullback. We expect the shift towards interest bearing deposits to stabilize and could see an inflection point in net interest income and NIM in the second half of the year. We believe that shift combined with progressive pay downs in our investment securities portfolio again roughly 3 billion a quarter, will provide meaningful revenue tailwinds that build throughout the year. And we have enough visibility at this point to provide full year 2023 outlook despite the market uncertainty and those details during our Q4 '22 earnings deck filed earlier today. We're prepared if those things don't improve, again, which is important.

And even if the market challenges are prolonged or get worse, it's important to note we have a high quality, very liquid balance sheet which I know there'll be lots of questions about strong capital levels. A seasoned management team which we experienced navigating challenging markets and adding a lot of new people with deep experience as well. And a consistent focus on our long-term business strategy. So when you put all that together, we feel clearly better about the outlook than we did last quarter where there was more uncertainty. And we certainly believe that the innovation economy is the best place to be. And even if we're in this prolonged period of time, for longer, or even a little bit deeper and deeper. We know we're going to weather that fine.

So with that, I'm going to turn it back to the operator to open up to questions.

See also 14 Countries Where Official Language is English and 20 Biggest Companies in Ohio.

To continue reading the Q&A session, please click here.