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SVB Financial Plans New Stock Offering

Zacks Equity Research

Santa Clara, CA based bank, SVB Financial Group (SIVB) recently announced the plan to publicly offer nearly 3.9 million shares of its common stock. The company filed the required registration statement with the U.S. Securities and Exchange Commission on Monday. However, the proposed transaction is subject to certain terms and conditions.

As part of the deal, the underwriters can choose to buy additional 585,000 shares to cover the over-allotment. Further, JPMorgan Chase & Co. (JPM) and Merrill Lynch of Bank of America Corporation (BAC) will serve as the joint book-running managers.

SVB Financial intends to utilize the net proceeds from the public offering to improve its working capital, finance capital expenditures and support its lending operations.

SVB Financial has a track record of aggressive organic growth. As of Mar 31, 2014, net loans came in at $10.7 billion, up 22.6% year over year, while average total deposits increased 31.9% to $25.5 billion.

SVB Financial remains focused on reducing its long-term debt as well. In first quarter 2014, the company reported average long-term debt of $455.2 million down nearly 1% year over year.

Moreover, the proceeds from the latest stock offering can be used to expand SVB Financial’s existing foothold which will in turn aid top-line growth. However, the company’s minimal international exposure makes us apprehensive as low interest rates and sluggish U.S. economic recovery will continue to pressure top line.

SVB Financial presently carries a Zacks Rank #2 (Buy). Another West bank worth considering is BofI Holding, Inc. (BOFI), which sports a Zacks Rank #1 (Strong Buy).

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