SVB Financial 4Q16 Earnings Call Notes

SVB Financial’s (SIVB) CEO Greg Becker on Q4 2016 Results

2017 will be a year of liquidity for VC investments

“As we look into 2017, we believe there are a lot of reasons to be positive. We are optimistic that 2017 will be a stronger year for VC investment and exits in 2016. If 2015 was the year of funding and 2016 was the year of recalibration, we believe 2017 has the potential to be the year of liquidity. ”

VCs have a lot of capital to deploy

“Fundraising remained extremely strong in 2016 despite the investment pull back as VCs raised $41.6 billion, the highest amount in a decade. Clearly, VCs will have a lot of capital to deploy in 2017, although later stage startups may continue to attract the lion’s share of investment at the expense of early-stage companies.”

Exit markets looking promising

“As we enter into 2017, the exit markets are looking promising. In addition to the 20 or so venture-backed companies that are formally registered for IPOs, we are aware of a growing pipeline of other companies that have file confidentially or are planning to file for an IPO. While the exit markets could remain somewhat challenging, especially for companies with high valuations, the mood has markedly improved over last year, helped by solid performance of companies that went public in the second half of 2016 and greater confidence since the US election.”

Repatriation could mean more M&A

“Yeah. So, two points, Ebrahim. One is, I can’t recall that far back when we actually got the change in the repatriation. So, I actually can’t off the top of my head remember exactly what the impact was. Do I believe it’s a big impact? The only place where it has a potential for an impact is from an M&A perspective. If a lot more cash comes back in, could you see more M&A from larger corporations as they now are flush with a lot of liquidity and now they’re going to be willing to put that for growth, that’s clearly a possibility.”

Michael Descheneaux

Lower tax rate will benefit shareholders

“Yeah, I think that’s a fair way to look. At this point – again, there’s been talk about what’s deductible, what’s not deductible. Again, we can’t go into that because it’s just – who knows right now. But just, all things being equal, if you drop the federal tax rate, you’re right, for the most part, at this point, we would see most of it drop into the bottom line and benefiting shareholders.”

Likely to continue to see stress in early stage

“So, it’s Marc Cadieux. Early stage was interesting in the fourth quarter, in that we saw charge-off levels in the early-stage segment that were reminiscent of 2015 best of times, but then we also saw an increase in new early-stage non-performers, indicative of that continued stress in that segment, going on from the recalibration that started last year. And given the diminished rate of investment in early-stage companies throughout 2016, it’s our conclusion that we’ll continue to see some stress in that segment.”