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Why Is Signature Bank (SBNY) Up 45.5% Since Last Earnings Report?
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It has been about a month since the last earnings report for Signature Bank (SBNY - Free Report) . Shares have added about 45.5% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Signature Bank due for a pullback? 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 Q4 Earnings Beat Estimates on Higher Revenues
Signature Bank reported fourth-quarter 2020 earnings per share of $3.26, beating the Zacks Consensus Estimate of $2.91. Also, the bottom line increased 18.1% from the prior-year quarter’s reported number.
Higher loan and deposit balances display a strong capital position. Also, revenue growth supported the results. However, elevated expenses and poor credit quality were key undermining factors.
Net income in the quarter was $173 million compared with the previous-year quarter’s $147.6 million. Pre-tax pre-provision earnings came in at $261.5 million, up 20.9%.
In 2020, earnings were $9.96 per share compared with the prior-year figure of $10.87. The bottom line surpassed the consensus estimate of $9.63. Net income increased 9.9% to $588.9 million.
In 2020, total revenues of $1.59 billion matched the consensus estimate. Also, the same increased 16.1% year over year.
Signature Bank’s total revenues in the fourth quarter increased 18.3% from the prior-year quarter to $412.9 million. The top line, nonetheless, missed the Zacks Consensus Estimate of $419.4 million.
Net interest income climbed 16.6% year over year to $395 million on increase in average interest earning assets. Further, net interest margin shrunk 49 basis points to 2.23%.
Non-interest income was $24.2 million, up 50.9% year over year. Growth in all the components led to the rise.
Non-interest expenses of $157.7 million jumped 14.2% from the prior-year quarter. This upsurge chiefly stemmed from rise in salaries and benefits due to massive hiring of private client banking teams.
Efficiency ratio was 37.6% compared with the 39% reported as of Dec 31, 2020. A lower ratio indicates a rise in profitability.
The company’s loans and leases, as of Dec 31, 2020, were $48.3 billion, up 5.7% sequentially. Additionally, total deposits rose 16.6% sequentially to $63.3 billion.
Credit Quality Deteriorates
The company recorded net charge-offs of $11.4 million during the December quarter compared with $2.5 million witnessed in the prior-year quarter. In addition, provision for loan and lease losses rose to $35.6 million on coronavirus concerns.
The ratio of non-accrual loans to total loans was 0.25%, up from the 0.15% recorded in the prior-year quarter. Allowance for credit losses for loans and leases was $508.3 million, up significantly.
Capital Ratios Deteriorate
As of Dec 31, 2020, Tier 1 risk-based capital ratio was 11.20% compared with 11.56% on Dec 31, 2019. Furthermore, total risk-based capital ratio was 13.54% compared with the prior-year quarter’s 13.26%. Tangible common equity ratio was 6.89%, down from 9.30%.
Return on average assets was 0.96% in the reported quarter compared with the year-earlier quarter’s 1.16%. As of Dec 31, 2020, return on average common stockholders' equity was 13.59%, up from 12.38%.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
VGM Scores
At this time, Signature Bank has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending downward for the stock, and the magnitude of these revisions looks promising. 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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Why Is Signature Bank (SBNY) Up 45.5% Since Last Earnings Report?
It has been about a month since the last earnings report for Signature Bank (SBNY - Free Report) . Shares have added about 45.5% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Signature Bank due for a pullback? 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 Q4 Earnings Beat Estimates on Higher Revenues
Signature Bank reported fourth-quarter 2020 earnings per share of $3.26, beating the Zacks Consensus Estimate of $2.91. Also, the bottom line increased 18.1% from the prior-year quarter’s reported number.
Higher loan and deposit balances display a strong capital position. Also, revenue growth supported the results. However, elevated expenses and poor credit quality were key undermining factors.
Net income in the quarter was $173 million compared with the previous-year quarter’s $147.6 million. Pre-tax pre-provision earnings came in at $261.5 million, up 20.9%.
In 2020, earnings were $9.96 per share compared with the prior-year figure of $10.87. The bottom line surpassed the consensus estimate of $9.63. Net income increased 9.9% to $588.9 million.
Revenues, Loans & Deposits Increase, Expenses Rise
In 2020, total revenues of $1.59 billion matched the consensus estimate. Also, the same increased 16.1% year over year.
Signature Bank’s total revenues in the fourth quarter increased 18.3% from the prior-year quarter to $412.9 million. The top line, nonetheless, missed the Zacks Consensus Estimate of $419.4 million.
Net interest income climbed 16.6% year over year to $395 million on increase in average interest earning assets. Further, net interest margin shrunk 49 basis points to 2.23%.
Non-interest income was $24.2 million, up 50.9% year over year. Growth in all the components led to the rise.
Non-interest expenses of $157.7 million jumped 14.2% from the prior-year quarter. This upsurge chiefly stemmed from rise in salaries and benefits due to massive hiring of private client banking teams.
Efficiency ratio was 37.6% compared with the 39% reported as of Dec 31, 2020. A lower ratio indicates a rise in profitability.
The company’s loans and leases, as of Dec 31, 2020, were $48.3 billion, up 5.7% sequentially. Additionally, total deposits rose 16.6% sequentially to $63.3 billion.
Credit Quality Deteriorates
The company recorded net charge-offs of $11.4 million during the December quarter compared with $2.5 million witnessed in the prior-year quarter. In addition, provision for loan and lease losses rose to $35.6 million on coronavirus concerns.
The ratio of non-accrual loans to total loans was 0.25%, up from the 0.15% recorded in the prior-year quarter. Allowance for credit losses for loans and leases was $508.3 million, up significantly.
Capital Ratios Deteriorate
As of Dec 31, 2020, Tier 1 risk-based capital ratio was 11.20% compared with 11.56% on Dec 31, 2019. Furthermore, total risk-based capital ratio was 13.54% compared with the prior-year quarter’s 13.26%. Tangible common equity ratio was 6.89%, down from 9.30%.
Return on average assets was 0.96% in the reported quarter compared with the year-earlier quarter’s 1.16%. As of Dec 31, 2020, return on average common stockholders' equity was 13.59%, up from 12.38%.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
VGM Scores
At this time, Signature Bank has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending downward for the stock, and the magnitude of these revisions looks promising. Notably, Signature Bank has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.