On Jul 1, we downgraded our long-term recommendation on
SVB Financial Group
) to Neutral from Outperform. This was based on the persistently
high operating expenses witnessed by the company.
Why the Downgrade?
Rising operating expenses remain a major concern for SVB
Financial. Operating expenses have been rising mainly due to
higher compensation and benefits costs. We expect expenses to
mount further, owing to increased regulatory compliance costs as
well as the continuous hiring of personnel.
Nevertheless, SVB Financial's first-quarter earnings marginally
beat the Zacks Consensus Estimate. Results were mainly driven by
growth in revenues, partially offset by a rise in operating
Over the last 90 days, the Zacks Consensus Estimate for 2013 rose
1.3% to $3.77 per share. The Zacks Consensus Estimate for 2014
fell nearly 1% to $3.97 per share, over the same time frame.
Thus, SVB Financial now has a Zacks Rank #3 (Hold).
SVB Financial remains focused on its organic growth strategy,
which is evident from the increase in its deposits and net
interest income over the last several quarters. Further, the
company aims to improve fee income as this is less susceptible to
the volatility of capital markets. However, a low interest rate
environment, sluggish economic recovery and stringent regulations
are expected to dent the company's profitability in the near
Stocks That Warrant a Look
Some banks that are performing better include
Central Pacific Financial Corp.
Pacific Continental Corp.
Umpqua Holdings Corporation
). All of them carry a Zacks Rank #1 (Strong Buy).
CENTRAL PAC FIN (CPF): Free Stock Analysis
PACIFIC CONTL (PCBK): Free Stock Analysis
SVB FINL GP (SIVB): Free Stock Analysis
UMPQUA HLDGS CP (UMPQ): Free Stock Analysis
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