SVB Financial Group (SIVB) Stock Analysis

SVB Financial Group (SIVB) is a diversified financial services company with 29 operating offices in the United States along with offices in the UK, China, Hong Kong, and India. The stock trades on the Nasdaq Global Select Market. The company operates under three primary segments: SVB Global Commercial Bank, SVB Private Bank, and SVB Capital.

Services Offered Under Each SVB Business Segment

Global Commercial Bank: deposit products, credit products, payment/cash management products, loan facilities, FX services, investment services/advisory, and vineyard development loans for the wine industry.

Private Bank: mortgages, restricted stock purchase loans, and other secured/unsecured loans.

Capital: venture capital investment services on behalf of third-party LP's.

sivb stock performance
Chart from SVB Financial Group's 2016 10-K filing showing 5-year absolute returns.

SVB Financial Group's Fundamentals

In its annual report, SVB Financial reported net income attributable to common stock shareholders of $382.6 million for fiscal year 2016. This represented a moderate increase from its 2015 net income of $343 million. Similarly, the company's 2015 net income figure dwarfed its 2014 net income of $263 million.

SVB 2016 EPS
SVB Financial Group's 2016 Basic and Diluted EPS.

For the first quarter of 2017, according to the firm's 10-Q, SVB achieved net income of $101 million-- diluted EPS of $1.91.

A significant factor used in determining the financial strength of publicly-traded banks is the capitalization structure. Specifically, the tier 1 leverage ratio and tier 1 capital (risk-based) ratio provide the best summary of a bank's ability to withstand negative shocks to its balance sheet. For the size of SVB Financial Group, proper capitalization requires a minimum tier 1 leverage ratio of 5% and a minimum tier 1 capital ratio of 10%. SVB Financial Group has a tier 1 leverage ratio of 8.34 and a tier 1 risk-based capital ratio of 13.26. Therefore, the firm is considered "well-capitalized". 

Additionally, SVB Financial Group appears to use conservative estimates for allowance for loan losses. While it has net loan charge-offs of .46% average total gross loans, the company uses an allowance for loan losses of 1.13% of period-end total gross loans.




SIVB Stock Rating

Given the company's impressive growth performance over many years, strong financial position, exemplary risk management, and the fact that SIVB stock trades at a noticeable discount to the overall market, I am adding SVB Financial Group to our List of Bullish Opinions. While a slump in the financial industry or overall market could continue to depress SIVB stock, I expect the company to significantly outperform the overall market over the next couple years.

Eric Bruin

Eric Bruin

Founder. Kelley School of Business '17. Write about stocks and business news. Contact for business inquiries or to write articles for The Stock Trader Blog.

One thought on “SVB Financial Group (SIVB) Stock Analysis

  • July 20, 2017 at 11:01 am
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    Excellent article thanks so much for sharing .

    Reply

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