Low Rates, Fee Income to Mar SVB Financial (SIVB) Q2 Earnings

SVB Financial Group SIVB is slated to announce second-quarter 2020 results on Jul 23, after the market closes. During the quarter, the overall lending scenario was muted, while there was substantial growth in commercial loans (constituting major part of its loan portfolio), which is expected to have offered some support.

The Zacks Consensus Estimate for average interest-earning assets of $67.2 billion suggests 21.1% growth from the prior-year reported figure.

However, SVB Financial’s net interest income (NII) is expected to have been hurt in the to-be-reported quarter owing to lower interest rates. The consensus estimate for the same is pegged at $505 million, indicating a decline of 4.5% year over year.

Near-zero interest rates are expected to have dampened the company’s net interest margin.

Other Factors to Influence Q2 Results

Non-Interest Income Not to Offer Much Support: SVB Financial’s growth in deposit service charges is likely to have been decent in the to-be-reported quarter, driven by a substantial increase in deposit balances. The consensus estimate for the same is $24.8 million, indicating a 12.3% rise on a year-over-year basis.

Additionally, given a significant improvement in commercial lending activity during the second quarter, the company’s lending fees are likely to have increased. The consensus estimate for lending-related fees is pegged at $12.5 million, indicating growth of 11.5% from the prior-year quarter.

The consensus estimate for foreign exchange fees is pegged at $44.6 million, which indicates 15.7% growth from the year-ago quarter.

However, given the weakness in consumer activities, there has been a decline in credit card-related consumer loans in the second quarter. Thus, the company’s credit card fee is expected to have declined from the prior-year quarter. The Zacks Consensus Estimate for the same of $25.1 million indicates fall of 12.8%.

Further, given a decline in M&As during the quarter, investment banking fees are expected to have declined in the to-be-reported quarter. The Zacks Consensus Estimate for the same suggests a 15.8% year-over-year decrease to $41 million.

The consensus estimate for client investment fees of $24 million indicates a 47.6% plunge from the prior-year quarter. Likewise, the Zacks Consensus Estimate for commissions of $13.4 million indicates a 7.3% year-over-year decline.

So, non-interest income is likely to have declined from a year ago. The consensus estimate for the same is pegged at $243 million, suggesting a decline of 27.2% from the prior-year reported figure.

Worsening Credit Quality: SVB Financial is likely to have recorded a substantial increase in provision for credit losses as it built reserves to combat coronavirus-induced economic slowdown.

Also, the Zacks Consensus Estimate for total non-performing assets of $147 million suggests a surge of 51.5% year over year. Further, the consensus estimate for total non-performing loans is pegged at $102 million, which indicates a rise of 5.4% from the year-ago reported figure.

Earnings Whispers

According to our quantitative model, chances of SVB Financial beating the Zacks Consensus Estimate are high this time around. This is because it has the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or higher.

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 +6.31%.

Zacks Rank: The company currently carries a Zacks Rank #3.

SVB Financial Group Price and EPS Surprise

SVB Financial Group Price and EPS Surprise

SVB Financial Group price-eps-surprise | SVB Financial Group Quote

Q2 Earnings & Sales Expectations

The Zacks Consensus Estimate for earnings of $2.96 per share has been revised 6.5% upward over the past 30 days. Nonetheless, the figure indicates a plunge of 51.3% from the year-ago reported number.

The consensus estimate for sales is pegged at $757.2 million, which suggests fall of 12.3% from the prior-year reported figure.

Other Stocks to Consider

Here are a few other bank stocks that you may also want to consider, as our model shows that these too have the right combination of elements to post an earnings beat in their upcoming releases.

Bank OZK OZK is slated to release quarterly results on Jul 23. The company has an Earnings ESP of +52.86% and currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Earnings ESP for Associated Banc-Corp ASB is +7.31% and the company presently carries a Zacks Rank #3. It is scheduled to report quarterly numbers on Jul 23.

East West Bancorp, Inc. EWBC is scheduled to report quarterly earnings on Jul 23. The company, which carries a Zacks Rank of 3 at present, has an Earnings ESP of +3.47%.

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