Can Loans, Fee Income Buoy SVB Financial (SIVB) Q2 Earnings?

SVB Financial Group SIVB is scheduled to announce second-quarter 2018 results on Jul 26, after market close. Its revenues and earnings are projected to grow year over year.

In the last reported quarter, SVB Financial’s earnings improved year over year. Higher revenues, loan growth and a fall in provision for credit losses aided results. However, higher adjusted non-interest expenses were the undermining factor.

Also, the company boasts an impressive earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, with an average beat of 15.5%.

SVB Financial Group Price and EPS Surprise

 

SVB Financial Group Price and EPS Surprise | SVB Financial Group Quote

Notably, the Zacks Consensus Estimate for earnings for the to-be-reported quarter has remained stable at $3.82 over the last 30 days. The figure represents a year-over-year surge of 64.7%. Further, the Zacks Consensus Estimate for sales is $613.5 million for the quarter, reflecting 30.2% year-over-year growth.

Factors to Influence Q2 Results

Increase in net interest income: Per the Fed’s latest data, commercial loans (constituting a major part of SVB Financial’s loan portfolio) recorded improvement in the second quarter while growth in real estate loans was modest.

The Zacks Consensus Estimate for average interest earning assets of $52.3 billion for the quarter represents a rise of 13.7% year over year. This, along with modest loan growth and higher interest rates will likely support the bank’s net interest income in the to-be-reported quarter.

Fee income to rise: SVB Financial’s second-quarter non-interest income will benefit from rise in service charge on deposits as deposit balance is expected to increase in the to-be-reported quarter. Also, given the increase in credit card related consumer loans during the quarter, the company’s credit card fees are expected to rise.

Thus, SVB Financial’s non-interest income is expected to witness a slight increase in to-be-reported quarter.

Likely rise in expenses: SVB Financial’s adjusted non-interest expenses are expected to increase due to its continued spending on technology systems overhaul and investment in franchise.

Asset quality not likely to lend much support: The Zacks Consensus Estimate for allowance for loan losses of $287 million reflects an increase of 21.1% from the year-ago quarter. Also, the consensus estimate for non-performing asset of $123 million indicates a rise of 2.5%.

Here is what our quantitative model predicts:

According to our quantitative model, chances of SVB Financial beating the Zacks Consensus Estimate in the second quarter are high. This is because it has the right combination of the two main ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better — to be confident of an earnings surprise call.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: The Earnings ESP for SVB Financial is +1.56%.

Zacks Rank: SVB Financial has a Zacks Rank #2 (Buy), which further increases the predictive power of ESP.

Other Stocks That Warrant a Look

Here are a few other finance stocks you may want to consider, as according to our model, these have the right combination of elements to post an earnings beat this quarter.

Legg Mason, Inc. LM has an Earnings ESP of +1.22% and carries a Zacks Rank #3. It is set to report June quarter-end results on Jul 25.

Hilltop Holdings Inc. HTH is slated to release results on Jul 26. It has an Earnings ESP of +0.40% and carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Cullen/Frost Bankers, Inc. CFR has an Earnings ESP of +0.89% and holds a Zacks Rank of 2. It is also scheduled to report results on Jul 26.

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Cullen/Frost Bankers, Inc. (CFR): Free Stock Analysis Report
 
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