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Signature Bank (SBNY) Down 0.5% 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 0.5% in that time frame, outperforming 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 Q4 Earnings Beat on Higher Revenues

Signature Bank reported fourth-quarter 2021 earnings per share of $4.34, beating the Zacks Consensus Estimate of $3.97. Also, the bottom line increased 33.1% from the prior-year quarter’s reported number.

Record growth in loan and deposit balances display a strong balance sheet position. Also, revenue growth supported the results. Nevertheless, Signature Bank recorded elevated expenses, declined capital position and poor credit quality.

Net income in the quarter was $272 million compared with the previous-year quarter’s $173 million. Pre-tax pre-provision earnings came in at $385.4 million, up 47.4%.

In 2021, earnings were $15.03 per share compared with the prior-year figure of $9.96. The bottom line surpassed the consensus estimate of $14.68. Net income increased 73.8% to $918.4 million from the year-ago figure.

Revenues, Loans & Deposits Rise, Expenses Increase

Total revenues for the fourth quarter increased 35.8% from the prior-year quarter’s level to $569.4 million. The top line surpassed the Zacks Consensus Estimate of $548.7 million.

For 2021, total revenues were $2 billion, up 25.5% year over year.

NII climbed 35.7% year over year to $535.9 million on higher average interest-earning assets. However, the NIM (on a tax-equivalent basis) contracted 32 basis points (bps) to 1.91%.

Non-interest income was $33.5 million, up 38.4% from the year-ago quarter’s number. Growth in fees and service charges led to the jump.

Non-interest expenses of $183.9 million rose 16.6%. The upsurge chiefly stemmed from the rise in salaries and benefits due to the massive hiring of private client banking teams.

The efficiency ratio was 32.3%, improving from 35.4% reported as of Dec 31, 2020. A lower ratio indicates a rise in profitability.

Loans, excluding loans held for sale, as of Dec 31, 2021, were $64.8 billion, marking a record increase 10.7%, sequentially. Total deposits rose a record 11.1%, sequentially, to $106.1 billion.

Credit Quality: A Mixed Bag

Net charge-offs were $33.7 million in the December quarter, up from $11.4 million recorded in the prior-year quarter. The ratio of non-accrual loans to total loans was 0.34%, up 9 bps year over year.

Nonetheless, allowance for credit losses for loans and leases was $474.4 million, down from $508.3 million in the prior-year quarter. Provision for credit losses declined to $6.9 million from $35.6 million in the prior-year quarter, mainly driven by improved macroeconomic conditions.

Capital Position Weak, Profitability Ratio Improves

As of Dec 31, 2021, Tier 1 risk-based capital ratio was 10.49%, down from 11.2% as of Dec 31, 2020. The total risk-based capital ratio was 11.73 % compared with the prior-year quarter’s 13.54%.

Return on average total assets was 0.96% in the reported quarter, flat with the year-earlier quarter’s level. As of Dec 31, 2021, the return on average common stockholders' equity was 14.76%, up from 13.59% in the year-ago quarter.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

The consensus estimate has shifted 6.47% due to these changes.

VGM Scores

At this time, Signature Bank has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. However, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Signature Bank has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.


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