SVB Financial Group's stock rose nearly 11% Friday after the company reported third-quarter earnings that handily beat analysts' estimates.
The Santa Clara, Calif.-based parent of Silicon Valley Bank said after the stock markets closed Thursday that it earned $37.6 million in the third quarter, down slightly from the same period last year but up 59% when proceeds from the sale of securities in last year's third quarter are excluded. Its earnings per share of 86 cents beat estimates of analysts polled by Thomson Reuters by nine cents.
SVB's shares shot up over $47 during Friday trading before settling at $46.05.
One analyst said SVB's earnings topped estimates largely because of unexpected higher valuations of mergers and acquisitions of Internet and social-networking companies — a financing specialty for Silicon Valley Bank.
"Beyond that, average loans and deposits both posted strong growth, the margin held steady and credit quality remained exceptional, allowing the company to record a very modest provision," said Aaron James Deer, a managing director at Sandler O'Neill & Partners LP, in a research note. He raised his 2011 earnings-per-share estimates by 25 cents, to $3.25, but lowered estimates by the same amount for 2012 due to anticipated higher expenses.
SVB lowered its provision 93%, to $769,000, in the third quarter compared with a year earlier. However, the provision was up by $134,000 from the second quarter as gross loan chargeoffs nearly doubled, to $8.2 million. SVB also attributed the quarterly increase in its provision to a 30% jump in loans year over year, to $6.3 billion, the bulk of which were made to the software industry.
The $19 billion-asset company also reported Thursday that it received approval from the China Banking Regulatory Commission to proceed with a joint-venture bank with Shanghai Pudong Development Bank Co. Ltd.
