Signature Bank Poised to Grow Organically: Should You Hold?

On Nov 18, we issued an updated research report on Signature Bank SBNY. The company remains well positioned for organic growth, supported by a rise in loan and deposit balances. Further, it is likely to gain from strong capital position. However, operating expenses are witnessing a rise.

Persistent rise in loans and deposit balances reflects Signature Bank’s organic growth potential. Deposits recorded a five-year (2014-2018) CAGR of 12.7%, backed by rising non-interest bearing and interest bearing deposits. Also, loans witnessed a CAGR of 19.3%.

Further, the company’s top line benefits from net interest income growth, which witnessed a CAGR of 12.8% with support from rising average interest earning assets.

Signature Bank’s strong capital position backs its efforts to expand operations by making strategic hires, and opening new divisions and platforms. Also, it keeps the company well poised to undertake opportunistic expansions in different regions, thereby improving its prospects.

Over the past six months, shares of this Zacks Rank #3 (Hold) company have rallied 5.6% compared with 3.9% growth of the industry.

However, costs witnessed a CAGR of 13.5% over the last five years (ended 2018). The increase was largely due to investments in technology and rise in salaries due to addition of new private client banking teams, including the Fund Banking Division and the Venture Banking Group. Management expects expenses to jump 12-16% in 2019.

Further, a higher interest rate environment is a headwind for Signature Bank’s net interest margin (NIM) due to its liability sensitive balance sheet. Notably, NIM declined from 3.36% in 2013 to 2.92% in 2018. The contraction resulted from rise in average cost of funds.

Led by these concerns, analysts seem to have a slightly bearish stance on Signature Bank. The Zacks Consensus Estimate for earnings has been lowered for 2019 and 2020 over the past 30 days.

Stocks to Consider

Salisbury Bancorp SAL has witnessed upward earnings estimate revisions for 2019 over the past 60 days. Moreover, this Zacks #1 Ranked (Strong Buy) stock has rallied 19%, year to date. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Bancorp’s TBBK current-year earnings estimates have been revised upward over the past 60 days. Further, the company’s shares have gained 37.6% in the year-to-date period. At present, it flaunts a Zacks Rank of 1.

Metropolitan Bank Holding Corp. MCB ongoing-year earnings estimate has moved north in 60 days’ time.  Additionally, the stock has appreciated 47%, so far this year. It currently sports a Zacks Rank #1.

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Signature Bank (SBNY) : Free Stock Analysis Report
 
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