SVB Financial Up 1.5% On Q1 Earnings Beat, Raised View

Shares of SVB Financial Group (SIVB) rallied 1.5% in the aftermarket trading in response to first-quarter 2021 results. Earnings per share of $10.03 comfortably outpaced the Zacks Consensus Estimate of $6.94. Also, the bottom line reflected substantial improvement from $2.55 earned in the year-ago quarter.

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

Net income available to common shareholders was $532.2 million, up significantly from $132.3 million in the prior-year quarter.

Revenues & Expenses Jump

Net revenues were $1.40 billion, jumping 69.9% year over year. Also, the top line beat the Zacks Consensus Estimate of $1.24 billion.

Net interest income (NII) was $659.6 million, which grew 25.8%. However, NIM (on a fully-taxable equivalent basis) contracted 83 basis points (bps) to 2.29%.

Non-interest income was $744.2 million, which soared significantly from $301.9 million in the prior-year quarter. 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 59.2% to $636 million. Increase in all expense components, except for net occupancy, and business development and travel costs resulted in the rise.

Non-GAAP core operating efficiency ratio was 58.52%, up from 47.71% in the prior-year quarter. A rise in efficiency ratio indicates lower profitability.

Loans and Deposit Balances Increase

As of Mar 31, 2021, SVB Financial’s total loans amounted to $47.7 billion, increasing 5.5% from the prior quarter, while total deposits jumped 21.7% to $124.2 billion.

Credit Quality: Mixed Bag

Provision for credit losses was $18.7 million, plunging substantially from $243.5 million in the year-ago quarter. Also, the ratio of allowance for loan losses to total loans was 0.82%, down 71 bps year over year.

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