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Signature Bank (SBNY) Down 9.4% Since Last Earnings Report: Can It Rebound?
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It has been about a month since the last earnings report for Signature Bank (SBNY - Free Report) . Shares have lost about 9.4% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Signature Bank due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Signature Bank Q3 Earnings Beat, Revenues Rise Y/Y
Signature Bank reported third-quarter 2022 earnings per share of $5.57, beating the Zacks Consensus Estimate of $5.42. Also, the bottom line increased a whopping 43.5% from the prior-year quarter’s reported number.
The results were supported by a significant increase in NII and fee income. However, the rise in non-interest expenses was a matter of concern.
The net income in the quarter came in at a record high of $358.5 million, up from the previous-year quarter’s $241.4 million. Pre-tax pre-provision earnings were $492.3 million, up 48.7% year over year.
Revenues, Loan & Expenses Rise
The total income increased 40.1% from the prior-year quarter to $717.7 million. However, the top line lagged the Zacks Consensus Estimate of $730.9 million.
NII climbed 40.2% year over year to $674.0 million, mainly due to a rise in average interest-earning assets, higher prevailing interest rates and utilization of excess cash. The net interest margins (NIM) increased to 2.38% in the third quarter of 2022 from 1.88% a year ago.
The non-interest income was $43.8 million, up 39.5% from the year-ago quarter’s number. Growth in fees and service charges and other income, including foreign currency activity and mark-to-market gains related to non-hedging derivatives, led to the increase in overall non-interest income.
The non-interest expenses of $225.5 million rose 24.4% from the prior-year quarter. The upsurge chiefly stemmed from the addition of new private client banking teams, national banking practices and operational personnel, and expenses related to client activity that have increased with the growth in clients and businesses.
The efficiency ratio was 31.4%, declining from 35.4% reported as of Sep 30, 2021. A lower ratio indicates a rise in profitability.
Loans, excluding loans held for sale as of Sep 30, 2022, were $73.8 billion, up 2.6% sequentially. Total deposits in the third quarter decreased $1.34 billion to $102.78 billion.
Credit Quality Improves
The allowance for credit losses for loans and leases was $464.8 million, down from $500.8 million in the prior-year quarter. The ratio of non-accrual loans to total loans was 0.25%, down 3 basis points (bps) year over year. Further, the net charge-offs were $10.2 million in the third quarter, down from $17.3 million.
However, the provision for credit losses increased to $29.1 million from $4 million in the prior-year quarter, driven primarily by deteriorating macroeconomic conditions.
Strong Profitability Ratio, Weak Capital Ratios
The return on average total assets was 1.24% in the reported quarter, up from 0.93% in the year-earlier quarter. As of Sep 30, 2022, the return on average common stockholders' equity was 18.42%, up from 13.63% in the year-ago quarter.
However, as of Sep 30, 2022, Tier 1 risk-based capital ratio was 10.76%, down from 11.53% as of Sep 30, 2021. The total risk-based capital ratio was 11.99%, down from the prior-year quarter’s 12.96%.
Outlook
Earning asset balances are expected to increase $1-$3 billion in the fourth quarter.
Management expects notable margin expansion for the upcoming quarters but at a slower pace. Particularly, NIM expansion is projected to be in the mid-single-digit range in the fourth quarter.
Operating expense growth is projected to be in the mid-20% range over the upcoming quarters and then decrease gradually in the second half of 2023 to the low-20% range. In 2024, the metric is expected to grow in the teens.
Fee income is anticipated to increase a few million quarter over quarter in the near term.
It expects the bank to generate a ROE 18%, going forward.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
VGM Scores
At this time, Signature Bank has a subpar Growth Score of D, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Signature Bank has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Signature Bank (SBNY) Down 9.4% Since Last Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for Signature Bank (SBNY - Free Report) . Shares have lost about 9.4% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Signature Bank due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Signature Bank Q3 Earnings Beat, Revenues Rise Y/Y
Signature Bank reported third-quarter 2022 earnings per share of $5.57, beating the Zacks Consensus Estimate of $5.42. Also, the bottom line increased a whopping 43.5% from the prior-year quarter’s reported number.
The results were supported by a significant increase in NII and fee income. However, the rise in non-interest expenses was a matter of concern.
The net income in the quarter came in at a record high of $358.5 million, up from the previous-year quarter’s $241.4 million. Pre-tax pre-provision earnings were $492.3 million, up 48.7% year over year.
Revenues, Loan & Expenses Rise
The total income increased 40.1% from the prior-year quarter to $717.7 million. However, the top line lagged the Zacks Consensus Estimate of $730.9 million.
NII climbed 40.2% year over year to $674.0 million, mainly due to a rise in average interest-earning assets, higher prevailing interest rates and utilization of excess cash. The net interest margins (NIM) increased to 2.38% in the third quarter of 2022 from 1.88% a year ago.
The non-interest income was $43.8 million, up 39.5% from the year-ago quarter’s number. Growth in fees and service charges and other income, including foreign currency activity and mark-to-market gains related to non-hedging derivatives, led to the increase in overall non-interest income.
The non-interest expenses of $225.5 million rose 24.4% from the prior-year quarter. The upsurge chiefly stemmed from the addition of new private client banking teams, national banking practices and operational personnel, and expenses related to client activity that have increased with the growth in clients and businesses.
The efficiency ratio was 31.4%, declining from 35.4% reported as of Sep 30, 2021. A lower ratio indicates a rise in profitability.
Loans, excluding loans held for sale as of Sep 30, 2022, were $73.8 billion, up 2.6% sequentially. Total deposits in the third quarter decreased $1.34 billion to $102.78 billion.
Credit Quality Improves
The allowance for credit losses for loans and leases was $464.8 million, down from $500.8 million in the prior-year quarter. The ratio of non-accrual loans to total loans was 0.25%, down 3 basis points (bps) year over year. Further, the net charge-offs were $10.2 million in the third quarter, down from $17.3 million.
However, the provision for credit losses increased to $29.1 million from $4 million in the prior-year quarter, driven primarily by deteriorating macroeconomic conditions.
Strong Profitability Ratio, Weak Capital Ratios
The return on average total assets was 1.24% in the reported quarter, up from 0.93% in the year-earlier quarter. As of Sep 30, 2022, the return on average common stockholders' equity was 18.42%, up from 13.63% in the year-ago quarter.
However, as of Sep 30, 2022, Tier 1 risk-based capital ratio was 10.76%, down from 11.53% as of Sep 30, 2021. The total risk-based capital ratio was 11.99%, down from the prior-year quarter’s 12.96%.
Outlook
Earning asset balances are expected to increase $1-$3 billion in the fourth quarter.
Management expects notable margin expansion for the upcoming quarters but at a slower pace. Particularly, NIM expansion is projected to be in the mid-single-digit range in the fourth quarter.
Operating expense growth is projected to be in the mid-20% range over the upcoming quarters and then decrease gradually in the second half of 2023 to the low-20% range. In 2024, the metric is expected to grow in the teens.
Fee income is anticipated to increase a few million quarter over quarter in the near term.
It expects the bank to generate a ROE 18%, going forward.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
VGM Scores
At this time, Signature Bank has a subpar Growth Score of D, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Signature Bank has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.