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Signature Bank (SBNY) Q4 Earnings Beat Estimates, Stock Down

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  • SBNY

Signature Bank SBNY 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. Nevertheless, the company’s shares tanked 1.3% following the release most likely on elevated expenses and poor credit quality.

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%.

Our Viewpoint

Signature Bank’s fourth-quarter results reflect escalating expenses and provisions on the coronavirus scare. It is focused on investing in technology by enhancing its payments platform and credit-approval system, which might further inflate costs. Nevertheless, the company has a robust balance sheet. Also, top-line strength on rising fee income and NII supports profitability.

Signature Bank Price, Consensus and EPS Surprise

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.

Earnings Results of Other Banks

Webster Financial WBS reported fourth-quarter 2020 adjusted earnings per share of 99 cents, which surpassed the Zacks Consensus Estimate of 72 cents. The reported figure excluded noteworthy items such as charges related to strategic optimization initiatives.

BOK Financial BOKF reported an earnings surprise of 11.1% for fourth-quarter 2020. Earnings per share of $2.21 handily surpassed the Zacks Consensus Estimate of $1.99. Further, the bottom line compares favorably with the prior-year quarter’s $1.56.

Fifth Third Bancorp FITB has reported fourth-quarter 2020 adjusted earnings of 88 cents per share, surpassing the Zacks Consensus Estimate of 69 cents. Also, the bottom line compared favorably with the prior-year quarter’s 68 cents per share.

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