Odeon's Dick Bove is 'intrigued' by SVB's (SIVB) preferred stock if it can avoid a run
Odeon Capital's Dick Bove weighs in on SVB Financial Group (NASDAQ: SIVB)
- said he is "intrigued" by the preferred stock - assuming that some catastrophic event does not develop
- downgraded the common stock 15 months ago
- immediate problem is whether the company can handle a run on the bank
- A well-known hedge fund manager is advising that depositors take their money out of the bank. in essence he and his associates are stimulating a run on the bank
- SVB had $173 billion in deposits at the end of 2022. Presumably, this number has declined in the past few months as SVB clients pull money out to fund their businesses. This is likely to continue.
- However, the bank has ample liquidity. Its security portfolio is valued at $120 billion
- SVB Financial has always been an exciting, well-managed company. It has served a high-risk marketplace. That marketplace is now failing the bank in two ways:
- The core products are in decreasing demand.
- The cost and availability of funds to its clients are drying up
- The bank’s loan losses are likely to rise, and earnings will be challenged for the coming two years. Despite this, the bank does have a sound balance sheet. It has the ability to pay the dividends on its preferred. For speculative investors purchasing the preferreds makes sense.