What happened
Shares of SVB Financial Group (SIVB.Q) fell 10% in March, according to data provided by S&P Global Market Intelligence, as a flurry of worrying economic signs weighed heavily on the entire banking sector and this Silicon Valley-based lender in particular.
So what
March was a bad month for bank stocks. Investors were rattled by the Federal Reserve's unexpected dovish turn that threw future rate hikes into doubt. The losses mounted as the 10-year Treasury bond yields fell below the yields of a three-month Treasury, meaning the yield curve was inverted for the first time since 2007. Investors often view an inverted yield curve as a sign of economic trouble on the horizon.
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SVB was hit harder than most bank stocks, with Bank of America and JP Morgan Chase, for example, down 5% and 3% for the month, respectively. But shares of SVB also trade at a premium to most bank stocks, priced at 2.4 times book and 13 times trailing earnings compared to Bank of America (1.16 times book, 11.23 times earnings) and JP Morgan (1.5 times book, 11.8 times earnings).
Now what
SVB has indicated the company does not need the Fed's help in 2019 to boost profitability. The bank has forecasted a net interest margin (NIM) of between 3.8% and 3.9% for the year, up from 3.69% in the fourth quarter, without any further Fed action.
SVB has long been the preferred bank of the Silicon Valley tech sector, with venture capital fueling the company's 127% year-over-year earnings growth in the fourth quarter. As long as the economy remains stable and the tech sector stays strong, SVB has the ingredients in place to be an outperformer.
