SIVB - 1 Reason I Am Confident in SVB Financial's Management Team
Management can make or break a company, so when evaluating potential stocks investors will want to take a good look at who's running the company, their background, and any other information that can help you understand their management style. SVB Financial (NASDAQ: SIVB) , the parent company of Silicon Valley Bank (which caters to the start-up, tech, venture capital, and private equity communities), has been a tremendous performer in recent years. But one comment from the SVB's president and CEO Greg Becker on the bank's most recent earnings call gave me a lot of confidence in its management. Here's why.
SVB Financial benefits a lot from rising interest rates because a huge amount of its deposit base is non-interest-bearing, meaning the bank doesn't pay any interest for those deposits, which also tend to be stickier as rates rise. So, as yields on the bank's loans rise as the Federal Reserve raises interest rates, the bank will see its margins widen.
The bank also has a diversified product set that it has built out and ramped up in recent years. SVB Financial estimates that for every 0.25% rate hike by the Fed, the bank will see an additional $100 million to $130 million of additional net interest income, the profits banks make on loans, securities, and cash after covering the cost to fund those assets.
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1 Reason I Am Confident in SVB Financial's Management Team