Shares of SVB Financial Group (SIVB.Q -10.00%), the parent company of Silicon Valley Bank, traded more than 11% higher as of 1:15 p.m. ET today after the company recently announced earnings results for the first quarter of 2022.
SVB reported diluted earnings per common share of $7.92 on close to $1.6 billion of revenue. Both numbers beat analyst estimates, with a big beat on earnings.
SVB is a niche bank largely catering to the tech and start-up communities and therefore its business is influenced by new start-up creation, the health of the venture capital and private equity communities, and start-up valuations and exits.
"If public market volatility persists, the pressure experienced by later-stage companies could trickle down to early stage," SVB's CEO Greg Becker said in a letter to shareholders.
He added: "We believe it is too soon to assume a broad pullback, given continued strong early stage investment and fundraising, and our current outlook does not assume a slowdown. If a pullback did occur, we would expect it to be short-lived, given the record amounts of VC dry powder still on the sidelines that investors need to put to work."
Despite some uncertainty in the broader markets, SVB had a strong quarter with net interest income (the profits banks make on loans), securities, and cash after funding those assets coming in at $1.08 billion, up 64% year over year. SVB is a huge beneficiary of rising interest rates.
In addition to a good quarter, management raised its outlook for the year, which has become a habit in recent quarters.
SVB now expects to grow average loan balances in the mid 30s percentage range and net interest income in the low 50s percentage range in 2022. This is significantly higher than past guidance, due to the Fed's new monetary outlook with several rate hikes expected this year. SVB is also predicting huge growth in fee income compared to 2021.
I've always seen SVB as one of the best bank stocks in the industry and think the recent pullback in the stock this year presents a good buying opportunity.