On Oct 9, 2013, we downgraded our long-term recommendation on
SVB Financial Group
) to Neutral from Outperform due to a persistent increase in
operating expenses. Though the company's second-quarter results
were impressive, we remain concerned about the still low interest
rate environment, sluggish economic recovery and regulatory
Why the Downgrade?
Rising operating expenses remains a headwind for SVB Financial.
We believe that expenses will mount further due to higher
regulatory compliance costs and continuous recruitment of staff.
Moreover, SVB Financial's profitability will likely suffer owing
to increase in costs and fee restrictions due to various
financial reform laws. Additionally, stringent regulatory
requirements are expected to adversely affect the bank's lending
as well as the investment abilities.
SVB Financial is slated to release third-quarter earnings results
on Oct 21. The Earnings ESP for the company is 0.00% and it
currently holds a Zacks Rank #2 (Buy). As a result, we are not so
confident about a positive earnings surprise this quarter.
However, the company's second-quarter earnings substantially
surpassed the Zacks Consensus Estimate.
The Zacks Consensus Estimate for 2013 advanced 3.3% to $4.13 per
share over the last 60 days. Further, for 2014, the Zacks
Consensus Estimate increased marginally to $4.17 per share over
the same time period.
Further, SVB Financial has been continuously lowering its
long-term debt level. Reduction in long-term debt will lead to
lower interest expenses, which in turn would result in an
improved bottom line.
Other Stocks Worth Considering
Some better-performing banks include
Glacier Bancorp Inc.
BofI Holding, Inc.
CoBiz Financial Inc.
). While Glacier Bancorp carries a Zacks Rank #1 (Strong Buy),
BofI Holding and CoBiz Financial carry the same Zacks Rank as SVB
BOFI HLDG INC (BOFI): Free Stock Analysis
COBIZ FINL INC (COBZ): Free Stock Analysis
GLACIER BANCORP (GBCI): Free Stock Analysis
SVB FINL GP (SIVB): Free Stock Analysis
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