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Technology-driven lender SVB Financial (NASDAQ: SIVB) has significantly outperformed in recent weeks. In this fool live Video clip, recorded May 3, Fool.com contributor Matt Frankel, CFP, and Focus on industry Host Jason Moser explains why the bank is so remarkable.
Jason Moser: Yeah, let’s end with SVB Group because it’s another one, SVB Financial. A business that is very popular in our crazy world, but maybe not as played as some of the others. What struck you at SVB Financial?
Matt Frankel: This is Silicon Valley Bank, this is what SVB stands for, for those who are not familiar with the business. As their name suggests, they’re based in Silicon Valley, they lend a lot to tech companies, start-ups like that. Think of them essentially as a bank and a venture capitalist at the same time, that’s how I would describe it. The market has been fantastic for things like that.
Moser: Yes.
Frankel: Think about what the Nasdaq has been up to over the past year.
Moser: Yes.
Frankel: It has been a great year for the bank. Not very surprisingly, the bank’s profits exceeded expectations, but what was surprising was that it was the best quarter in the history of the bank. The bank earned more than $ 10 per share for the quarter. Best ever, the stock climbed 12% after profits. Return on equity was 27%. The norm for a bank is around 10%, which is what you are looking for.
Moser: Yes.
Frankel: They increased their assets. A bank’s assets could grow 5-7% in a year, which would be considered a good year for a Bank of America. SVB’s assets have grown 90% year over year.
Moser: Yes.
Frankel: Total customer 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 appeared, you missed them again. The CEO says there are favorable winds for growth, which makes people really optimistic, it’s not just a one-time thing. Keep in mind that we mentioned last weekend that many banks said some things that were only temporary, like increased trading income fueled by market volatility. Increase in investment banking income fueled by IPOs. If the investment activity in the tech sector is really here to stay and is going to intensify for some time, then that will be a positive catalyst for this bank.
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