SVB Financial Group (SIVB) targets the strongest verticals in the U.S. economy, growing in the double digits in recent years, and its Silicon Valley Bank is positioned to soar profits if domestic interest rates being to move higher after the current extended period of low interest rates, says Aaron James Deer, Managing Director and Equity Research Analyst at Sandler O’Neill + Partners, L.P.
“[Silicon Valley Bank] has seen 20% to 30% growth over the past couple of years, and it still has a terrific outlook. SVB focuses on technology companies, life sciences, venture capital, private equity — areas that have been very strong in our economy — and SVB has been a beneficiary of that,” Deer said.
Although Deer doesn’t currently have a “buy” rating on the stock, but he says any pullback in the stock price may present a good opportunity to get in the name. The bank is part of the larger Western banks regional group, a banking group that has managed to maintain profitability by controlling operating expenses and funding costs.
“[SVB Silicon Valley Bank] profitability is pretty good, but this is another bank where, if we ever see interest rates move higher, its profitability should really soar, so that’s one to keep a close eye on. Right now I think the stock is a little expensive, but on any sort of pullback, that would be one to look at,” Deer said.
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