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What's in the Cards for Signature Bank's (SBNY) Q1 Earnings?

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Signature Bank (SBNY - Free Report) is scheduled to report first-quarter 2022 earnings, before the opening bell, on Apr 19. The company’s revenues and earnings are expected to have witnessed year-over-year increases.

Signature Bank is one of the preeminent banks catering to the cryptocurrency industry, with significant deposits from its digital asset business. In the last reported quarter, the bank’s earnings surpassed the Zacks Consensus Estimate on an increase in the non-interest income and record growth in loan and deposit balances. However, a rise in operating expenses was the undermining factor.

Notably, Signature Bank has an impressive earnings surprise history. It surpassed estimates in all trailing four quarters, delivering an earnings surprise of 10.8%, on average.

Signature Bank Price and EPS Surprise

 

Signature Bank Price and EPS Surprise

Signature Bank price-eps-surprise | Signature Bank Quote

The company’s activities in the to-be-reported quarter were adequate to win analysts’ confidence. As a result, the Zacks Consensus Estimate for first-quarter earnings of $4.31 has moved marginally upward in the past month. Also, the figure indicates a 33% rise from the year-ago reported number. The consensus estimate for revenues is pegged at $604.5 million, suggesting year-over-year growth of 37.6%.

Now let’s discuss the factors that are likely to have impacted the company’s quarterly performance:

Loans: Lending activity accelerated in the first quarter. Per the Fed’s latest data, there was considerable strength in both commercial and consumer lending, including credit cards, commercial and industrial loans, and residential and commercial real estate loans, in January and February.

In 2021, the bank onboarded eight private client banking teams — two in New York, four on the West Coast, a corporate mortgage finance team and Small Business Administration (SBA) origination team.

Hence, even though the first quarter is usually a seasonally-lighted quarter for SBNY’s lending business, such past efforts are expected to have driven loan growth in the SBA lending, mortgage warehouse, commercial real estate and fund banking businesses in the quarter.

Going by management’s guidance, first-quarter non-multifamily commercial real estate loans are expected to grow $250-$750 million.

Net Interest Income (NII): Management expects loan and investment security balances to increase $3-$7 billion in the first quarter of 2022. This is anticipated to have driven interest income in first-quarter 2022, in turn, driving the average interest-earning asset balance.

Moreover, the low-cost funding source, non-interest-bearing deposits, representing 41.8% of total deposits (as of Dec 31, 2021), is expected to have reduced interest expenses and alleviated pressure on NII in the first quarter. 

Hence, average interest-earning assets and robust average deposit and loan growth are likely to have contributed to NII growth in the first quarter.

The consensus estimate for NII before provision for credit losses is pegged at $573 million, suggesting 6.9% sequential growth.

Non-Interest Revenues: Supported by continued growth of its business, West Coast expansion and digital deposit initiative, commissions are expected to have increased. The consensus mark for the same is pegged at $4.1 million, indicating a marginal sequential increase.

Business expansion and deposit growth are likely to drive fees and service charges. The Zacks Consensus Estimate for the same is pegged at $23.3 million, suggesting an 8.2% increase from the prior quarter’s reported figure.

Overall, the Zacks Consensus Estimate for non-interest income is pegged at $34.8 million, suggesting a 4.1% increase from the prior quarter’s reported figure. Management expects first-quarter fee income to increase 10% year over year.

Expenses: Signature Bank’s costs are expected to have continued to flare up in the quarter under review, given the investments in technology and digitalization efforts. As the company has been continuing to expand, the hiring of private client banking teams and operational support to meet the bank’s needs are expected to have increased salary expenses.

Additionally, the rising inflation is anticipated to have led to elevated non-interest expenses in the quarter to be reported. Such an increase is likely to have hindered bottom-line growth in the first quarter.

Earnings Whispers

Our proven model does not predict an earnings beat for SBNY this time around. This is because the company does not have the right combination of two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat this time around.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: The Earnings ESP for Signature Bank is -1.59%.

Zacks Rank: The company currently carries a Zacks Rank of 3.

Stocks That Warrant a Look

A couple of finance stocks that you may want to consider, as these have the right combination of elements to post an earnings beat in their upcoming releases per our model, are Commerce Bancshares, Inc. (CBSH - Free Report) and Associated Banc-Corp (ASB - Free Report) .

The Earnings ESP for Commerce Bancshares is +2.33% and it carries a Zacks Rank #2 (Buy) at present.

CBSH is scheduled to report quarterly numbers on Apr 19.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Associated BancCorp is slated to report quarterly earnings on Apr 21.

ASB, which sports a Zacks Rank of 1 at present, has an Earnings ESP of +0.81%.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.


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