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What's in Store for SVB Financial (SIVB) in Q3 Earnings?

Zacks Equity Research

SVB Financial Group SIVB is slated to announce third-quarter 2019 results on Oct 24, after the market closes. While its revenues for the quarter are expected to have grown on a year-over-year basis, earnings are likely to have witnessed a decline.

In the last reported quarter, the company’s earnings outpaced the Zacks Consensus Estimate. Higher revenues and a decline in provisions aided results despite higher non-interest expenses.

The company boasts an impressive earnings surprise history. Its earnings surpassed the consensus estimate in each of the trailing four quarters, the average beat being 15%.

SVB Financial Group Price and EPS Surprise

SVB Financial Group Price and EPS Surprise

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

However, activities of the company in the third quarter failed to encourage analysts to revise earnings estimates upward. Thus, the Zacks Consensus Estimate for its third-quarter earnings has remained unchanged at $4.99 over the past seven days. The figure indicates a decline of 2.2% from the year-ago reported number.

The consensus estimate for sales is pegged at $788.1 million, which suggests growth of 12.1% from the prior-year quarter’s reported figure.

Now, let’s check the factors that are likely to have impacted third-quarter performance.

Factors at Play

Net interest income (NII) not to offer much support: Per the Fed’s latest data, commercial loans (constituting a major part of SVB Financial’s loan portfolio) did not witness significant improvement in the third quarter. Moreover, growth in real estate loans remained soft during the quarter. Thus, soft loan growth along with the flattening of the yield curve, interest rate cuts and rise in deposit betas is expected to have hampered NII.

Nonetheless, the Zacks Consensus Estimate for average interest earning assets for the third quarter is pegged at $61 billion, which represents rise of 12.1% year over year.

Fee income growth likely to be modest: Supported by an increase in credit card-related consumer loans during the third quarter, the company’s credit card fee is expected to have risen. Moreover, on the expectation of rise in deposit balances, service charge on deposits is likely to have been positively impacted. Thus, SVB Financial’s non-interest income is likely to have witnessed modest improvement.

Expenses likely to rise: SVB Financial’s adjusted non-interest expenses are expected to have remained elevated in the third quarter because of continued spending on technology system overhaul and investments in franchise.

Asset quality not likely to lend much support: The Zacks Consensus Estimate for allowance for loan losses of $311 million suggests an increase of 8.7% from the year-ago reported figure.

Earnings Whispers

Per our quantitative model, the chances of SVB Financial beating the Zacks Consensus Estimate in the third quarter are low. This is because it does not have the right combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or better.

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 -3.14%.

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

Stocks to Consider

Here are a few finance stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat in the upcoming release.

The Blackstone Group Inc BX has an Earnings ESP of +3.70% and a Zacks Rank #3 at present. The company is slated to release results on Oct 23.

Huntington Bancshares Incorporated HBAN is scheduled to release results on Oct 24. It presently has an Earnings ESP of +0.60% and 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 is expected to release results on Oct 31. It currently has an Earnings ESP of +0.07% and a Zacks Rank #3.

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