What’s in the Cards for Signature Bank’s (SBNY) First Quarter Earnings?

Signature Bank SBNY is expected to report its first quarter 2022 results before the opening bell on April 19. The company’s revenues and profits are expected to have seen year-over-year increases.

Signature Bank is one of the leading banks in the cryptocurrency industry, with large deposits coming from its digital asset business. In the most recently reported quarter, the bank’s earnings beat the Zacks consensus estimate on the back of higher non-interest income and record growth in loan and deposit balances. However, an increase in operating expenses was the slowing factor.

Notably, Signature Bank has an impressive track record of earnings surprises. It has exceeded estimates in the past four quarters, generating an earnings surprise of 10.8% on average.

Signature Bank Prize and EPS Surprise

Signature Bank price-eps-surprise | Signature Bank Quote

The company’s business in the reportable quarter was enough to earn analysts’ confidence. As a result, Zacks consensus estimate for first quarter results of $4.31 has risen slightly over the past month. Additionally, the figure indicates a 33% increase from the number reported a year ago. The consensus revenue estimate is pegged at $604.5 million, suggesting 37.6% year-over-year growth.

Now let’s discuss the factors that may have had an impact on the company’s quarterly performance:

Loans: Credit activity accelerated in the first quarter. According to the latest news from the Fed Datacommercial and consumer loans, including credit cards, commercial and industrial loans, and residential and commercial real estate loans, were considerably strong 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 a Small Business Administration (SBA) origination team.

Therefore, while the first quarter is generally a seasonal quarter for SBNY’s lending business, these past efforts should have driven loan growth in the SBA lending, mortgage warehouse, commercial real estate and banking businesses. funds during the quarter.

Based on management guidance, first quarter non-multifamily commercial real estate loans are expected to increase by $250 million to $750 million.

Net interest income (NII): Management expects loan and investment securities balances to increase by $3 billion to $7 billion in the first quarter of 2022. This should have resulted in interest income in the first quarter of 2022, in turn driving the average balance of interest-earning assets.

Additionally, the low-cost source of funding, non-interest bearing deposits, representing 41.8% of total deposits (as of December 31, 2021), is expected to have reduced interest expense and eased pressure on the NII as of first trimester.

Therefore, average interest-earning assets and strong average growth in deposits and loans likely contributed to the growth of the MNI in the first quarter.

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

Non-interest income: Supported by its continued business growth, west coast expansion and digital filing initiative, commissions are expected to have increased. The consensus mark for the same is set at $4.1 million, indicating a marginal sequential increase.

Business expansion and deposit growth are expected to incur fees and service charges. Zacks’ consensus estimate for the same is pegged at $23.3 million, suggesting an 8.2% increase from the previous quarter’s reported figure.

Overall, Zacks’ consensus estimate for non-interest revenue 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 grow 10% year over year.

Expenses: Signature Bank’s costs are expected to have continued to increase in the quarter under review, given investments in technology and digitization efforts. As the business continues to expand, the hiring of private banking teams and operational support to meet the bank’s needs is expected to result in higher payroll costs.

Additionally, rising inflation should have led to higher non-interest expenses in the reportable quarter. Such an increase is likely to have hampered earnings growth in the first quarter.

Earnings Whispers

Our proven model does not predict an earnings beat for SBNY this time around. It’s because the company doesn’t have the right combination of two key ingredients – a positive ESP Earnings and Zacks Rank #3 (Hold) or higher – to increase the chances of a beat win this time around.

You can discover the best stocks to buy or sell before they’re flagged with our Income ESP filter.

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

Zack’s Ranking: The company currently carries a Zacks rank of 3.

Actions worth a look

A few financial stocks that you may want to consider, as they have the right combination of elements to show a beating in profits in their next releases according to our model, are Commerce Bancshares, Inc. CBSH and Associated Bank-Corp ASB.

The earnings ESP for Commerce Bancshares is +2.33% and it currently carries Zacks rank #2 (buy).

CBSH is expected to release its quarterly numbers on April 19.

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

Associated BancCorp is expected to release its quarterly results on April 21.

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

Stay up to date with upcoming results announcements with the Zacks Earnings Schedule.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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