SVB Financial Group (SIVB) is a financial service, bank holding, and financial holding company. It offers commercial and private banking products and services through its principal subsidiary, Silicon Valley Bank. It operates through Global Commercial Bank (GCB); SVB Private Bank; SVB Capital; and SVB Securities.
In its efforts to tackle the 40-year high inflation, the Federal Reserve had raised interest rates by 25 basis points in March and 50 basis points earlier this month. The increase in interest rates bodes well for regional banks as it helps them increase their interest income. With further aggressive interest rate hikes planned by the Fed, regional banks are expected to benefit.
However, not all regional banks are well-positioned to gain from the rising interest rate environment. SIVB has declined 40.2% in price over the past six months and 22.3% over the past year to close the last trading session at $434.70. It is currently trading 43% below its 52-week high of $763.22, which it hit on November 16, 2021.
Here’s what could influence the performance of SIVB in the upcoming months:
Disappointing Financials
SIVB’s EPS came in at $7.92, representing a decline of 21% year-over-year for the first quarter ended March 31, 2022. The company’s net income to common stockholders declined 11.2% year-over-year to $472 million. In addition, its net interest margin came in at 2.13%, compared to 2.29% in the year-ago period. Also, its total noninterest income decreased 30.5% year-over-year to $517 million.
Unfavorable Analyst Estimates
Analysts expect SIVB’s EPS for the quarter ending June 30, 2022, to decrease 11.1% year-over-year to $8.08.
Stretched Valuation
In terms of forward non-GAAP P/E, SIVB’s 12.10x is 21.4% higher than the 9.96x industry average. Likewise, its 1.73x forward non-GAAP PEG is 55% higher than the 1.11x industry average. And the stock’s 1.82x forward P/B is 66.4% higher than the 1.09x industry average.
POWR Ratings Reflect Bleak Prospects
SIVB has an overall D rating, equating to Sell in our POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. SIVB has an F grade for Value, in sync with its 3.55x forward P/S, which is 25.1% higher than the industry average of 2.83x.
SIVB is ranked #39 out of 41 stocks in the C-rated Pacific Regional Banks industry.
Click here to access SIVB’s ratings for Growth, Momentum, Stability, Sentiment, and Quality.
Bottom Line
The shares of SIVB are currently trading below their 50-day and 200-day moving averages of $515.86 and $615.56, respectively, indicating a downtrend. Moreover, despite the rising interest rates, SIVB is not expected to perform well due to its weak financials and stretched valuation. So, we think it could be wise to avoid the stock now.
How Does SVB Financial Group (SIVB) Stack Up Against Its Peers?
SIVB has an overall POWR Rating of D, equating to a Sell rating. Therefore, one might want to consider investing in other Pacific Regional Banks stocks with an A (Strong Buy) or B (Buy) rating, such as PCB Bancorp (PCB), OP Bancorp (OPBK), and Northrim BanCorp, Inc. (NRIM).
SIVB shares were trading at $440.75 per share on Monday morning, up $6.05 (+1.39%). Year-to-date, SIVB has declined -35.02%, versus a -16.46% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.
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