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SVB FINANCIAL GROUP (SIVBQ)·Q1 2022 Earnings Summary

Executive Summary

  • SVB Financial Group delivered EPS of $7.92 and net income of $472M, driven by 15% QoQ growth in net interest income (NII) to $1.091B and a 22bp improvement in NIM to 2.13% as higher rates slowed premium amortization and balance sheet growth continued .
  • Management raised FY’22 guidance materially: NII growth from “high 30s%” to “low 50s%,” NIM from 1.90–2.00% to 2.10–2.20%, core fee income growth from “mid 20s%” to “mid 40s%,” while lowering SVB Securities revenue to $500–$550M on ECM softness; overall revenue outlook increased .
  • Loans grew 7% QoQ to $68.7B (average $67.1B) led by Global Fund Banking (capital call lines), Technology and Life Science/Healthcare, and Private Bank mortgages; deposits rose 4.7% to $198.1B; credit quality remained excellent with NPLs at 0.10% and NCOs at 0.05% annualized .
  • Call tone: early-stage VC healthy; later-stage funding and IPOs slowed amid public market volatility; rate sensitivity remains significant (~$100–$130M annualized NII and $20–$50M fees for each additional 25bp hike), but FY’22 expense outlook will not increase with future rate hikes, supporting operating leverage .

What Went Well and What Went Wrong

What Went Well

  • Robust NII and NIM: NII (FTE) rose to $1.091B (+15% QoQ) and NIM to 2.13% (+22bps), helped by slower premium amortization and the shift of cash into higher-yielding securities and loans .
  • Strong loan growth and deposit franchise: Average loans +7% QoQ to $67.1B, period-end deposits +4.7% to $198.1B, with 66% of average deposits noninterest-bearing supporting low funding costs (0.05%) .
  • Guidance raised across core revenue drivers: Management increased FY’22 outlooks for NII, NIM, loans, and core fees, citing the March rate hike and higher rates overall; quote: “we’re raising our 2022 revenue outlook… have meaningful revenue upside if the forward rate curve plays out” (Greg Becker) .

What Went Wrong

  • SVB Securities revenue pressure: Revenue lowered to $500–$550M for FY’22 as public market volatility delayed ECM transactions and reduced public equity valuations; noninterest income fell to $517M (-8% QoQ) .
  • Market-related gains moderated: Non-GAAP net gains on investment securities fell QoQ vs Q4; management expects warrant/investment gains to moderate and be volatile with fewer exits and lower public valuations .
  • Later-stage VC and IPO slowdown: Management cited an 85% annualized decline in public listings and weakness in later-stage funding, pressuring client liquidity growth versus exceptional 2021 levels .

Financial Results

MetricQ1 2021Q3 2021Q4 2021Q1 2022
Diluted EPS ($)10.03 6.24 6.22 7.92
Net Income ($MM)532 365 371 472
Net Interest Income (FTE) ($MM)665 859 947 1,091
Net Interest Margin (%)2.29 1.95 1.91 2.13
Noninterest Income ($MM)744 672 561 517
Core Fee Income (non-GAAP) ($MM)159 204 216 230
SVB Securities Revenue (non-GAAP) ($MM)166 107 145 118
Provision for Credit Losses ($MM)19 21 48 11
Balance Sheet MetricQ1 2021Q3 2021Q4 2021Q1 2022
Average Loans ($MM)46,281 59,291 62,573 67,070
Period-end Loans ($MM)47,675 61,487 66,276 68,665
Average Deposits ($MM)110,608 163,392 183,062 190,718
Period-end Deposits ($MM)124,150 171,182 189,203 198,134
Avg. Client Investment Funds ($MM)151,579 191,286 207,578 206,140
Period-end Client Investment Funds ($MM)163,882 200,234 210,086 199,216
Average Total Assets ($MM)124,815 182,690 204,760 216,069

Segment breakdown – period-end loans ($MM):

SegmentQ3 2021Q4 2021Q1 2022
Global Fund Banking34,120 37,958 39,344
Investor Dependent – Early Stage1,550 1,593 1,707
Investor Dependent – Growth Stage3,827 3,951 4,032
Total Investor Dependent5,377 5,544 5,739
Cash Flow Dependent – SLBO1,895 1,798 1,826
Innovation C&I5,916 6,673 7,247
Private Bank8,370 8,743 9,235
CRE2,753 2,670 2,595
Premium Wine980 985 997
Other C&I1,259 1,257 1,175
Other252 317 316
PPP565 331 191
Total Loans61,487 66,276 68,665

KPIs:

KPIQ3 2021Q4 2021Q1 2022
Net Interest Margin (%)1.95 1.91 2.13
Net Charge-offs (% avg loans, annualized)0.07 0.01 0.05
NPLs (% of total loans)0.19 0.14 0.10
ACL – Loans (% of total loans)0.65 0.64 0.61
Avg. Noninterest-bearing Deposits (%)67.1 66.4 65.8
Total Cost of Deposits (%)0.05 0.04 0.05

Guidance Changes

MetricPeriodPrevious Guidance (1/20/22)Current Guidance (4/21/22)Change
Average Loans (YoY growth)FY 2022 vs FY 2021Low 30s% Mid 30s% Raised
Average Deposits (YoY growth)FY 2022 vs FY 2021Low 40s% Low 40s% Maintained
Net Interest Income (YoY growth)FY 2022 vs FY 2021High 30s% Low 50s% Raised
Net Interest Margin (%)FY 20221.90–2.00 2.10–2.20 Raised
Net Loan Charge-offs (%)FY 20220.15–0.35 0.15–0.35 Maintained
Core Fee Income (YoY growth)FY 2022Mid 20s% Mid 40s% Raised
SVB Securities Revenue ($MM)FY 2022625–675 500–550 Lowered
Noninterest Expense ex. merger (% growth)FY 2022Low 20s% High 20s% Raised
Effective Tax Rate (%)FY 202225–27 25–27 Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2021 & Q4 2021)Current Period (Q1 2022)Trend
Rate sensitivity~+$106M annualized NII per 25bp; ~+$195–225M initial client investment fee increase with first 25bp (Q3) ; still asset-sensitive (Q4) ~+$100–130M annualized NII and ~+$20–50M per 25bp for client investment fees; guidance excludes future hikes (Dan Beck) Strengthened
Deposit beta & mixCost of deposits ~5bps; high NIB share (Q3) 60% deposit beta assumption; migration toward ~40% interest-bearing as rates rise (Dan Beck) Gradual repricing
SVB Securities outlookFY’21 $525–$550M preliminary for 2021; building tech IB (Q3) FY’22 lowered to $500–$550M on ECM softness; tech IB hiring continues Lower near term
Warrant/investment gainsExceptional 2021 gains; caution for volatility (Q4) Expect moderation and volatility; potential for negative warrant gains possible but not expected (Greg Becker) Moderating
Private Bank integrationEarly wins; ~$700M Q3’21 mortgage originations (Q3) New brand launched; AUM declined QoQ on markets; target ~$21–22B YE AUM Ongoing build
Interest rate risk & TBVHedging AFS fair value; 49% AFS hedged (Q3) Monetized $204M swap gains; protected TBV by ~$2.5B; rebalanced into higher-yielding USTs Reinforced
Capital call lendingLargest loan growth driver; diversified repayments (Q3) Robust demand; loan pipelines near all-time highs (Mike Descheneaux) Strong

Management Commentary

  • “We’re pleased to be reporting an excellent quarter of strong earnings and profitability... based on this momentum, we’re raising our 2022 revenue outlook… and have meaningful revenue upside if the forward rate curve plays out.” — Greg Becker, CEO .
  • Rate sensitivity: “Expectation... with each 25bp increase... $100–$130M annualized NII... and $20–$50M annualized client investment fees.” — Dan Beck, CFO .
  • Deposits: “It’s going to take time to get to our assumptions of a 60% deposit beta... we’ll probably migrate into the 40% range of interest-bearing to noninterest-bearing accounts.” — Dan Beck .
  • Expense outlook: “We basically have said we were going to cap out at the high 20s... currently... future rate hikes would not increase our FY’22 expense growth outlook.” — Greg Becker; Dan Beck confirmed sensitivity covered in guidance .
  • Macro & credit: Clients are “better positioned than they ever have been with lots of liquidity,” and reserve builds would be model-driven in a recession scenario (management) .
  • TBV focus: “We like to manage to ensure that we have flexibility... reducing sensitivity to significant movements... managing capital from a strength perspective all-in.” — Dan Beck .

Q&A Highlights

  • Guidance excludes further rate hikes; upside modeled via sensitivity metrics; deposit mix and beta expected to reprice gradually toward ~40% interest-bearing over the cycle .
  • Loan growth confidence: strong pipelines in Tech and Life Sciences; capital call lines remain robust despite rate increases; Private Bank mortgages strong though refinance to slow at higher rates .
  • Expenses: high-20s growth (ex-merger) seen as a ceiling barring performance-tied comp; future hikes will not lift expense guide .
  • Macro risks: In a recessionary scenario, clients’ liquidity and diversified business lines expected to mute impacts; reserve builds would follow modeled scenarios .
  • TBV protection: Monetized hedges and portfolio repositioning aimed at TBV stability despite rising rates .

Estimates Context

  • We attempted to retrieve S&P Global consensus estimates (EPS and revenue) for Q1 2022 but could not due to a missing CIQ mapping for ticker SIVBQ in the SPGI dataset (tool error: “Missing CIQ mapping for ticker ‘SIVBQ’”) [SpgiEstimatesError].
  • As a result, we cannot present Wall Street consensus comparisons for Q1 2022. Management did not provide quarterly EPS/revenue guidance; comparisons herein are vs. prior periods and management’s FY’22 guidance .

Key Takeaways for Investors

  • Rate leverage is significant: each additional 25bp likely adds ~$100–$130M annualized NII and ~$20–$50M client investment fees, with NIM guided to 2.10–2.20% for FY’22; expenses (ex-merger) will not rise with further hikes, supporting operating leverage .
  • Balance sheet momentum continues: average loans $67.1B (+7% QoQ), period-end loans $68.7B, deposits $198.1B (+4.7% QoQ), backed by a sticky low-cost deposit base (0.05% cost; ~66% NIB) .
  • SVB Securities near-term headwind: FY’22 revenue lowered to $500–$550M amid ECM softness; offset by stronger NII and improved client investment fees due to higher short rates .
  • Credit pristine, reserves adequate: NPLs 0.10%, NCOs 0.05% annualized, ACL 0.61% of loans; provision of $11M driven by growth and modest net losses .
  • Strategic hedging and portfolio repositioning protected TBV and boosted future NII (~$37M annual NII from reinvestment), with $49M net realized gains from unwinding swaps and selling hedged AFS .
  • VC backdrop bifurcated: early-stage healthy with strong client acquisition; later-stage and IPO activity slowed ~85% annualized vs 2021 pace—planning assumptions reflect moderation rather than pullback .
  • Trading/PM angle: Near-term stock drivers are rate trajectory (upside to NII/NIM), ECM reopening (SVB Securities earnings), and proof of sustained loan/deposit growth; macro volatility could temper warrant/investment gains QoQ .
Notes: All figures USD; “FTE” denotes fully taxable equivalent basis.

All data and statements above are sourced from company filings and the Q1 2022 earnings call transcript: .