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SVB Financial (SIVB) Q4 Earnings Beat, Revenues & Expenses Up

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Zacks Equity Research
·5 min read
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SVB Financial Group’s SIVB fourth-quarter 2020 earnings per share of $7.40 comfortably surpassed the Zacks Consensus Estimate of $3.75. Also, the bottom line increased 46.2% year over year.

Results largely benefited from higher revenues, and improving loan and deposit balances. Also, provision benefit acted as a tailwind. However, increase in operating expenses and contracting net interest margin (NIM) were the undermining factors.

Net income available to common shareholders was $388.3 million, jumping 47.7% from the prior-year quarter.

For 2020, earnings per share of $22.87 surpassed the Zacks Consensus Estimate of $19.21. Also, the figure improved 5.2% from the previous year. Net income was $1.19 billion, up 4.8% year over year.

Revenues & Expenses Rise

Net revenues for the reported quarter were $1.21 billion, increasing 43.2% year over year. Also, the top line beat the Zacks Consensus Estimate of $863.4 million.

For the year, net revenues of $4.00 billion increased 20.4% year over year. The figure surpassed the Zacks Consensus Estimate of $3.64 billion.

Quarterly net interest income (NII) was $591.5 million, which grew 10.8% year over year. Further, NIM (on a fully-taxable equivalent basis) contracted 86 basis points (bps) to 2.40%.

Non-interest income was $621.8 million, which jumped 98.5% year over year. The upswing primarily resulted from a drastic improvement in investment banking revenues, net gains on investment securities and net gains on equity warrant assets.

Non-interest expenses increased 44.3% from the prior-year quarter to $664.8 million. Increase in all expense components, except for business development and travel costs, resulted in the rise.

Non-GAAP core operating efficiency ratio was 62.67%, up from 53.78% in the prior-year quarter. A rise in efficiency ratio indicates lower profitability.

Loans and Deposit Balances Increase

As of Dec 31, 2020, SVB Financial’s total loans amounted to $45.18 billion, increasing 17.6% from the prior quarter, while total deposits jumped 20.3% to $101.98 billion.

Credit Quality: Mixed Bag

Provision for credit losses was a benefit of $38.4 million against provision of $17.4 million in the year-ago quarter. Also, the ratio of net charge-offs to average loans was 0.09%, down 9 bps year over year.

However, the ratio of allowance for loan losses to total loans was 0.99%, up 8 bps year over year.

Capital Ratios Decline, Profitability Ratios Mixed

At the fourth quarter end, common equity tier 1 risk-based capital ratio was 11.04% compared with 12.58% at the end of the prior-year quarter. Total risk-based capital ratio was 12.65% as of Dec 31, 2020, down from 14.23%.

Return on average assets on an annualized basis was 1.49%, down from 1.51% recorded in the year-ago quarter. However, return on average equity was 20.23%, which increased from 17.03%.

2021 Outlook

Average loans are expected to grow in the mid-20s range. Moreover, average deposit balances are projected to grow in the mid-40s range.

NII is anticipated to grow in the low-20s range. NIM is projected to be 2.20-2.30%.

Core fee income (including client investment fees, foreign exchange fees, credit card fees, deposit service charges, lending-related fees and letters of credit fees) is expected to be stable year over year.

Non-interest expenses (excluding costs related to non-controlling interests) are projected to increase in low-single digits.

Net loan charge-offs are expected to be 0.20-0.40% of average total loans.

The effective tax rate is expected to be 26-28%.

Our Take

SVB Financial remains well-poised to continue benefiting from growth in loans and deposits along with global diversification. However, continuously increasing expenses and declining NIM due to lower interest rates are major near-term concerns.

SVB Financial Group Price, Consensus and EPS Surprise

 

SVB Financial Group Price, Consensus and EPS Surprise
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

Washington Federal’s WAFD first-quarter fiscal 2021 (ended Dec 31) earnings of 51 cents per share surpassed the Zacks Consensus Estimate of 42 cents. However, the figure reflects a year-over-year decline of 40.7%.

Bank of New York Mellon Corporation’s BK fourth-quarter 2020 adjusted earnings per share of 96 cents were 5% lower than the prior-year quarter’s level. The Zacks Consensus Estimate for earnings was 93 cents.

Zions Bancorporation’s ZION fourth-quarter 2020 net earnings per share of $1.66 surpassed the Zacks Consensus Estimate of $1.01. Moreover, the reported figure represents a rise of 71.1% from the year-ago quarter’s number.

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The Bank of New York Mellon Corporation (BK) : Free Stock Analysis Report
 
Zions Bancorporation, N.A. (ZION) : Free Stock Analysis Report
 
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