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Here's Why SVB Financial Stock Has Been on Fire

By Matthew Frankel, CFP® - Updated Jun 24, 2021 at 10:10AM

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The tech-focused lender has been a major standout recently.

Tech-focused lender SVB Financial (SIVB -4.82%) has been a major outperformer in recent weeks. In this Fool Live video clip, recorded on May 3, Fool.com contributor Matt Frankel, CFP, and Industry Focus host Jason Moser discuss why the bank has been such a standout. 

Jason Moser: Yeah, let's wrap it up then with SVB Group because that's another one, SVB Financial. A company that is very popular in our Foolish universe, but one that maybe doesn't get quite as much play as some of the others. What about SVB Financial stood out to you?

Matt Frankel: This is Silicon Valley Bank, is what SVB stands for, for those who aren't familiar with the business. As the name implies, they're based in Silicon Valley, they loan a lot to tech businesses, start-ups like that. Essentially consider them a bank and a venture capital firm in one, is how I could describe it. The market's been fantastic for things like that.

Moser: Yeah.

Frankel: Think of how the Nasdaq has done over the past year.

Moser: Yeah.

Frankel: It's been a great year for the bank. Not terribly surprising, the bank's earnings exceeded expectations, but what was surprising, is that it was the best quarter in the bank's history. The bank earned over $10 a share for the quarter. Best ever, the stock shot up 12% after earnings. The return on equity was 27%. Standard for a bank is about 10% is what you're looking for.

Moser: Yeah.

Frankel: They grew their assets. A bank's assets might grow 5-7% in a year, would be considered a good year for like a Bank of America. SVB's assets grew 90% year over year.

Moser: Yeah.

Frankel: Total client funds grew 71% year over year. That's a pretty impressive increase. As the CEO says, there are significant tailwinds at this point for even more growth. Jason's dog just popped up, you just missed them again. The CEO says that there's tailwinds for growth, which makes people really optimistic this isn't just a one-time thing. Remember we mentioned last weekend a lot of the banks said some of the things that were just temporary, like the higher trading revenue fueled by the volatility in the markets. Higher investment banking revenue fueled by IPOs. If investment activity in the tech sector is really here to stay and it's going to ramp up for a while, then it's going to be a positive catalyst for this bank.

SVB Financial provides credit and banking services to The Motley Fool. Jason Moser has no position in any of the stocks mentioned. Matthew Frankel, CFP has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends SVB Financial Group. The Motley Fool has a disclosure policy.

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Stocks Mentioned

SVB Financial Group Stock Quote
SVB Financial Group
SIVB
$435.39 (-4.82%) $-22.07

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