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Signature Bank (SBNY) Q2 Earnings Beat on Higher Revenues

Zacks Equity Research

Signature Bank SBNY reported second-quarter 2019 earnings per share of $2.72, outpacing the Zacks Consensus Estimate of $2.71. Yet, the bottom line decreased 3.5% from the prior-year quarter’s reported tally.

Results reflect growth in revenues, aided by higher loan and deposit balances. Moreover, lower provisions acted as a tailwind. However, fall in net interest margin and escalating expenses were major drags.

Net income for the second quarter was $147.9 million compared with the previous-year quarter’s $154.6 million.

Revenues Rise, Loans & Deposits Increase, Expenses Escalate

Signature Bank’s total revenues increased 2.5% from the prior-year quarter to $334.9 million. Also, the top line outpaced the Zacks Consensus Estimate of $333.3 million.

Net interest income inched up 1.6% year over year to $326.3 million, backed by rise in average interest earning assets. However, net interest margin contracted 20 basis points to 2.74%.

Non-interest income was $8.6 million, up nearly 53.6% year over year. This rise was primarily due to an increase in all components of income.

Non-interest expenses of $131.9 million flared up 17.1% from the prior-year quarter. This upsurge primarily stemmed from rise in almost all components of expenses, partially offset by lower FDIC assessment fees.

Efficiency ratio was 39.4% compared with 34.5% reported as of Jun 30, 2018. Higher ratio indicates fall in profitability.

The company’s loans and leases, as of Jun 30, 2019, were $37.9 billion, up 1.2% sequentially. Further, total deposits rose 2.6% sequentially to $37.5 billion.

Credit Quality Improves

The company recorded net recoveries of $3.7 million in the quarter compared with net charge offs of $3 million in the prior-year quarter. In addition, provision for loan and lease losses plunged 32.5% year over year to $5.4 million.

The ratio of non-accrual loans to total loans was 0.11%, significantly down from 0.46% recorded in the prior-year quarter.

Capital Ratios

As of Jun 30, 2019, Tier 1 risk-based capital ratio was 11.59% compared with 12.11% on Jun 30, 2018. Further, total risk-based capital ratio was 12.82% compared with the prior-year quarter’s 13.43%. Tangible common equity ratio was 9.46%, up from 9.10%.

Return on average assets was 1.22% in the reported quarter compared with 1.39% in the year-earlier quarter. As of Jun 30, 2019, return on average common stockholders' equity was 12.88%, down from 15.22%.

Capital Deployment

During the reported quarter, the company repurchased 412,977 shares of common stock, at a total cost of $50 million.

Our Viewpoint

Signature Bank’s second-quarter results reflect top-line strength and improved credit metrics. Furthermore, the company displayed a solid capital position and robust balance sheet. It remains focused on investing in technology by enhancing its payments platform and credit approval system. However, escalating expenses and contracting net interest margin due to its liability-sensitive balance sheet pose concerns.
 

Signature Bank Price, Consensus and EPS Surprise

Signature Bank Price, Consensus and EPS Surprise

Signature Bank price-consensus-eps-surprise-chart | Signature Bank Quote

Currently, Signature Bank carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other banks

Texas Capital Bancshares Inc. TCBI reported earnings per share of $1.50 in second-quarter 2019, lagging the Zacks Consensus Estimate of $1.53. Results, however, compare favorably with the prior-year quarter’s $1.38. Elevated expenses were on the downside. However, rise in revenues was a positive factor. Further, organic growth was reflected, with significant rise in loans and deposit balances.

PNC Financial PNC reported positive earnings surprise of 1.8% in the second quarter. Earnings per share of $2.88 outpaced the Zacks Consensus Estimate of $2.83. The bottom line also reflected a 5.9% jump from the prior-year quarter’s reported figure. Higher revenues, driven by higher net interest income and escalating fee income, aided the company’s results. However, rise in costs and provisions were headwinds.

Driven by top-line strength, Synovus Financial SNV reported a positive earnings surprise of 1.01% in the June-end period. Adjusted earnings of $1.00 per share beat the Zacks Consensus Estimate of 99 cents. This apart, the reported figure came in 8.4% higher than the prior-year quarter tally. Higher revenues, backed by strong loan balances, stoked organic growth. Notably, lower efficiency ratio and rising fee income were tailwinds. Nonetheless, escalating expenses and provisions were undermining factors.

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