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Loan Growth Aids Signature Bank (SBNY) Amid Increasing Costs
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Signature Bank (SBNY - Free Report) has a healthy balance-sheet position, backed by robust growth in its loans and deposit balance. However, high costs arising from spending on technology and human capital are likely to hinder its bottom line.
Signature Bank has a healthy balance sheet position. The company has achieved growth in deposits every year since its inception in 2001. SBNY has also geographically diversified its expansion into the West Coast.
Going forward, loan growth from new lending verticals is expected to continue to aid the bank’s growth prospects. Therefore, deposit and loan balances are poised for growth, with support from a gradually improving economy and efforts to diversify the lending segments.
Organic growth remains a key strength for Signature Bank, as reflected by its net interest income (NII) growth story. A rise in average interest-earning assets, backed by robust average deposit and loan growth, is aiding NII growth. Further, management expects continued cash deployment and higher interest rates to drive NII growth in the upcoming year.
Hence, we believe that the company is well-positioned to maintain its increasing revenue trend going forward, given its client-centric business model and expansion in strategic markets.
The company’s focus on the digital asset banking business is a positive. In 2019, Signature Bank was the first FDIC-insured bank to launch a blockchain-based digital payments platform, Signet. Signet permits commercial clients to make real-time payments in U.S. dollars at any given time. The company believes that the customer pipeline for the digital asset business will continue to be robust in the upcoming quarters. Such dynamic moves are driving deposit growth and bode well for the long term.
However, cost escalation is the key downside for SBNY. The upsurge is chiefly stemming 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. Further, management expects non-interest expenses to grow 16% in 2022.
Its capital-deployment activities keep us apprehensive. The company has a share-repurchase program in place, which was suspended post the coronavirus outbreak in March 2020. There was $450 million remaining under the amended program as of Dec 31, 2021. However, its debt/equity ratio does not compare favorably with the broader industry. Thus, the company’s capital-deployment activities might not be sustainable over the long term.
Currently, SBNY carries a Zacks Rank #3 (Hold). Over the past year, shares of the company have declined 7.1%, wider than the 4.5% fall recorded by the industry.
Independent Bank’s Zacks Consensus Estimate for current-year earnings has been revised upward over the past 30 days. Over the past two years, shares of IBCP have gained 48.7%.
Civista Bancshares also witnessed an upward earnings estimate revision for 2022 over the past 30 days. CIVB’s shares have gained 37.4% over the past two years.
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Loan Growth Aids Signature Bank (SBNY) Amid Increasing Costs
Signature Bank (SBNY - Free Report) has a healthy balance-sheet position, backed by robust growth in its loans and deposit balance. However, high costs arising from spending on technology and human capital are likely to hinder its bottom line.
Signature Bank has a healthy balance sheet position. The company has achieved growth in deposits every year since its inception in 2001. SBNY has also geographically diversified its expansion into the West Coast.
Going forward, loan growth from new lending verticals is expected to continue to aid the bank’s growth prospects. Therefore, deposit and loan balances are poised for growth, with support from a gradually improving economy and efforts to diversify the lending segments.
Organic growth remains a key strength for Signature Bank, as reflected by its net interest income (NII) growth story. A rise in average interest-earning assets, backed by robust average deposit and loan growth, is aiding NII growth. Further, management expects continued cash deployment and higher interest rates to drive NII growth in the upcoming year.
Hence, we believe that the company is well-positioned to maintain its increasing revenue trend going forward, given its client-centric business model and expansion in strategic markets.
The company’s focus on the digital asset banking business is a positive. In 2019, Signature Bank was the first FDIC-insured bank to launch a blockchain-based digital payments platform, Signet. Signet permits commercial clients to make real-time payments in U.S. dollars at any given time. The company believes that the customer pipeline for the digital asset business will continue to be robust in the upcoming quarters. Such dynamic moves are driving deposit growth and bode well for the long term.
However, cost escalation is the key downside for SBNY. The upsurge is chiefly stemming 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. Further, management expects non-interest expenses to grow 16% in 2022.
Its capital-deployment activities keep us apprehensive. The company has a share-repurchase program in place, which was suspended post the coronavirus outbreak in March 2020. There was $450 million remaining under the amended program as of Dec 31, 2021. However, its debt/equity ratio does not compare favorably with the broader industry. Thus, the company’s capital-deployment activities might not be sustainable over the long term.
Currently, SBNY carries a Zacks Rank #3 (Hold). Over the past year, shares of the company have declined 7.1%, wider than the 4.5% fall recorded by the industry.
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Stocks That Warrant a Look
A couple of better-ranked stocks from the banking space are Independent Bank Corporation (IBCP - Free Report) and Civista Bancshares, Inc. (CIVB - Free Report) . IBCP currently sports a Zacks Rank of 1 (Strong Buy), while CIVB carries a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Independent Bank’s Zacks Consensus Estimate for current-year earnings has been revised upward over the past 30 days. Over the past two years, shares of IBCP have gained 48.7%.
Civista Bancshares also witnessed an upward earnings estimate revision for 2022 over the past 30 days. CIVB’s shares have gained 37.4% over the past two years.