On Sep 25, 2013, we upgraded our long-term recommendation on
SVB Financial Group
) to Outperform from Neutral. The recommendation upgrade was
based on better-than-expected second-quarter 2013 results.
The Rationale Behind the Upgrade
On Jul 25, SVB Financial reported second-quarter 2013 earnings
per share of $1.06, beating the Zacks Consensus Estimate of 94
cents. Results were driven by growth in revenues, partially
offset by a rise in operating expenses. An improvement in capital
ratios as well as loans and deposits were among the positives.
The Zacks Consensus Estimate for 2013 advanced 1.5% to $4.06 per
share over the last 60 days. Further, for 2014, the Zacks
Consensus Estimate increased 1.2% to $4.17 per share over the
same time period. Hence, SVB Financial currently carries a Zacks
Rank #2 (Buy).
SVB Financial continues to grow organically as depicted by the
growth in its deposits and increase in its net interest income
over the last several quarters. Moreover, the company has been
continuously lowering its long-term debt level through
redemptions and maturities of senior notes. Reducing debt level
will aid in procuring additional finance for working capital,
capital expenditures, acquisitions, debt-service requirements and
other purposes. Moreover, this will result in reduced interest
expenses, which in turn would improve the bottom line.
Moreover, SVB Financial's capital ratios seem strong and well
above the regulatory requirements. We expect the company to
continue building capital over the next couple of years,
resulting in a better financial position that will help meet the
stringent capital requirements.
However, a still-low interest rate environment, sluggish economic
recovery and stringent regulations are expected to slightly
dampen profitability in the near term.
Other Stocks to Consider
Some other banks worth considering include
BofI Holding, Inc.
BBCN Bancorp, Inc.
City National Corporation
). While BofI Holding carries a Zacks Rank #1 (Strong Buy), BBCN
Bancorp and City National Corporation has the same Zacks Rank as
BBCN BANCORP (BBCN): Free Stock Analysis
BOFI HLDG INC (BOFI): Free Stock Analysis
CITY NATIONAL (CYN): Free Stock Analysis
SVB FINL GP (SIVB): Free Stock Analysis
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