Bank stock performance was mixed Friday, but Silicon Valley Bancshares shares jumped 18.74% after the company reported earnings that far exceeded Wall Street expectations.
The American Banker index of 225 banks lost 0.19%. The index of top 50 banks fell 0.86%.
Late Thursday the Santa Clara, Calif., company reported that third-quarter diluted per-share earnings surged 176% from a year earlier, to 69 cents. Analysts had expected the company to earn 63 cents a share, according to First Call. Total assets jumped 48.6%, to $5.5 billion.
Jordan Hymowitz, an analyst at Robertson Stephens, who upgraded the banking companys rating to buy from attractive, said Silicon Valley has phenomenal management.
David H. Winton of Keefe, Bruyette & Woods Inc. also upgraded Silicon Valley to buy from outperform.
Gary Townsend of Friedman, Billings, Ramsey & Co. who restored his buy rating for Silicon Valley a month after downgrading it to accumulate, said the company had another enormous quarter. He wrote that its stock price decline since last month when Nasdaq stocks have been in a near free-fall removed his worries about valuation.
The stock was oversold, Mr. Townsend said, and that is when you want to buy. He lowered his target price for the stock by $7, to $60, and said that he expects the stock to trade at around 11.8 times his estimated per-share earnings of $2.86 for next year.
Some analysts said Silicon Valley was overly penalized for its association with technology companies.
People might associate Silicon Valley too closely with technology stocks and the Nasdaq, said Eva A. Radtke, an analyst at Prudential Securities, who reiterated her second-tier accumulate rating Friday. We saw the same pattern in March.
Net interest income rose 61.4% from the same period a year earlier, to $87.8 million, and non-interest income jumped 221%, to $43.1 million. Deposits grew 41%, to $4.8 billion. Nonperforming assets decreased 31.2% from the second quarter.
Mr. Townsend wrote that deposit growth and the mix of deposit growth remain key drivers of the companys future earnings, especially as this will control the rate at which it can deploy its newly raised capital to re-lever the balance sheet to a more optimal level.
Credit quality, a top concern among bank stock analysts, drew some attention, but analysts said Silicon Valleys situation did not appear to worsen in the quarter.
Ms. Radtke wrote in her note that the companys chargeoffs of $22.7 million appear high at first glance, but that $18.7 million of it is from three previously disclosed entertainment loans, which are likely to be recovered.
Silicon Valley rose $6.3125 to $40.
Another winner on Friday was E-Trade, whose stock increased $1.3125, or 9.05%, to close at $15.8125. E-Trade also reported earnings of $7.2 million, or 2 cents per share.
Gregory W. Smith of Chase H&O in San Francisco upgraded the online bank to strong buy from buy.
