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Signature Bank (SBNY - Free Report) provided a mid-quarter financial update, wherein the bank noted a decline in spot deposits and loans since the start of the year through Mar 1, 2023.
Spot deposit balances fell around $826 million. The company reported total deposits of $88.59 billion as of 2022 end.
The decrease in deposit balances has been driven by the fall in digital asset client-related deposits of $1.51 billion, as a result of the bank’s efforts to reduce the size of deposit relationships in the space.
The decline in digital asset client-related deposits more than offset the $682-milllion increase in deposits (excluding digital asset client-related balances).
Since the start of the year through Mar 1, 2023, the company’s average deposit balance stood at $88.79 billion. This is higher than the 2022 ending balance of $88.59 billion but lower than the fourth-quarter 2022 quarter-to-date average balance of $98.6 billion.
Since the start of the year through Mar 1, 2023, the company witnessed a decline in spot loan balances by $1.71 billion. As of 2022 end, the company’s reported $73.8 billion in loans and leases. The decline in loans is likely due to the bank’s strategy of reducing loan balances in its larger business lines.
Our Take
With the instability in the crypto markets, SBNY’s reduced reliance on digital asset-related deposit exposure better places SBNY to gain after the Fed stops raising rates. As for loans, management anticipates measured growth from the Healthcare Banking, and Finance and Corporate Mortgage Finance teams in the upcoming quarters.
However, cost escalation is the key downside for Signature Bank. Non-interest expenses witnessed a compound annual growth rate (CAGR) of 15.4% over the last five years (2018-2022). The upsurge chiefly stemmed from the rise in salaries and benefits due to the massive hiring of private client banking teams. The continuation of such a trend will hinder its bottom-line expansion.
To conclude, analysts do not seem confident about SBNY’s earnings potential. Earnings estimates for 2023 have seen 2% downward revisions over the past month. This indicates a 29% year-over-year decline.
The bank’s shares have plunged 4.9% in the quarter-to-date period against the industry’s rise of 2.8%.
Image Source: Zacks Investment Research
SBNY currently carries a Zacks Rank #5 (Strong Sell).
Stocks Worth a Look
A couple of better-ranked stocks from the finance space are The Bank of New York Mellon (BK - Free Report) and State Street (STT - Free Report) .
The Zacks Consensus Estimate for BNY Mellon’s current-year earnings has moved 2.7% higher over the past 30 days. Its shares have gained 22.1% in the past six months. Currently, BK carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
State Street currently carries a Zacks Rank #2. Its earnings estimates for 2023 have been revised 1.7% upward over the past 30 days. In the past six months, STT’s shares have rallied 31.2%.
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Signature Bank's (SBNY) Loans & Deposit Balances Decline QTD
Signature Bank (SBNY - Free Report) provided a mid-quarter financial update, wherein the bank noted a decline in spot deposits and loans since the start of the year through Mar 1, 2023.
Spot deposit balances fell around $826 million. The company reported total deposits of $88.59 billion as of 2022 end.
The decrease in deposit balances has been driven by the fall in digital asset client-related deposits of $1.51 billion, as a result of the bank’s efforts to reduce the size of deposit relationships in the space.
The decline in digital asset client-related deposits more than offset the $682-milllion increase in deposits (excluding digital asset client-related balances).
Since the start of the year through Mar 1, 2023, the company’s average deposit balance stood at $88.79 billion. This is higher than the 2022 ending balance of $88.59 billion but lower than the fourth-quarter 2022 quarter-to-date average balance of $98.6 billion.
Since the start of the year through Mar 1, 2023, the company witnessed a decline in spot loan balances by $1.71 billion. As of 2022 end, the company’s reported $73.8 billion in loans and leases. The decline in loans is likely due to the bank’s strategy of reducing loan balances in its larger business lines.
Our Take
With the instability in the crypto markets, SBNY’s reduced reliance on digital asset-related deposit exposure better places SBNY to gain after the Fed stops raising rates. As for loans, management anticipates measured growth from the Healthcare Banking, and Finance and Corporate Mortgage Finance teams in the upcoming quarters.
However, cost escalation is the key downside for Signature Bank. Non-interest expenses witnessed a compound annual growth rate (CAGR) of 15.4% over the last five years (2018-2022). The upsurge chiefly stemmed from the rise in salaries and benefits due to the massive hiring of private client banking teams. The continuation of such a trend will hinder its bottom-line expansion.
To conclude, analysts do not seem confident about SBNY’s earnings potential. Earnings estimates for 2023 have seen 2% downward revisions over the past month. This indicates a 29% year-over-year decline.
The bank’s shares have plunged 4.9% in the quarter-to-date period against the industry’s rise of 2.8%.
Image Source: Zacks Investment Research
SBNY currently carries a Zacks Rank #5 (Strong Sell).
Stocks Worth a Look
A couple of better-ranked stocks from the finance space are The Bank of New York Mellon (BK - Free Report) and State Street (STT - Free Report) .
The Zacks Consensus Estimate for BNY Mellon’s current-year earnings has moved 2.7% higher over the past 30 days. Its shares have gained 22.1% in the past six months. Currently, BK carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
State Street currently carries a Zacks Rank #2. Its earnings estimates for 2023 have been revised 1.7% upward over the past 30 days. In the past six months, STT’s shares have rallied 31.2%.