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Up 44% in the Past Year, Does Signature Bank Have More Room to Run?

Commercial banking products and services provider Signature Bank (SBNY) has witnessed solid growth in its most recent quarter. Its stock has gained 44% in price over the past year. However, given the uncertainties surrounding looming interest rate increases and the turn of events on the geopolitical front, will SBNY be able to maintain its momentum? Keep reading to learn our view.

New York City-based Signature Bank (SBNY) serves the needs of privately owned business clients, their owners, and senior managers. It offers a wide variety of business and personal banking products and services along with investment, brokerage, asset management, and insurance products and services through its subsidiary, Signature Securities Group Corporation. The stock has gained 44.1% in price over the past year and marginally year-to-date.

SBNY’s shares have slumped 2.9% over the past five days, however, to close yesterday’s trading session at $325.70. The stock is currently trading above its 200-day moving average but below its 50-day moving average.

The Federal Reserve is expected to increase its benchmark interest rate several times this year to combat rising inflation. Regional banks generate significant revenues from net interest margins, which has attracted investors’ attention amid the forthcoming interest rate hikes.  But although regional banks are known to benefit from rate increases, the pace at which the Fed tightens monetary policy could be key. Too steep a trajectory of rate hikes could even weigh on bank earnings. On the other hand, regional bank shares could suffer if the sell-off that has already weighed on the benchmarks continues to accelerate. “Financial services are generally attractive, but there’s danger in always saying this will happen,” cautioned CFP Douglas Boneparth, president of Bone Fide Wealth in New York.

Here’s what could shape SBNY’s performance in the near term:

Stretched Valuation

In terms of forward P/E, SBNY is currently trading at 16.85x, which is 44.2% higher than the 11.68x industry average. Also, its 7.54 forward Price/Sales ratio is 130.9% higher than the 3.26 industry average. Also, SBNY’s 2.25 forward Price/Book is 91.8% higher than the 1.17x industry average.

Solid Financials

For the fourth quarter, ended Dec. 31, 2021, SBNY’s net income came in at a record $271.99 million, representing a 57.2% increase year-over-year, while its EPS increased 33.1% year-over-year to $4.34. Its total deposits increased 11.1% to $106.13 billion, including non-interest-bearing deposit growth of $9.98 billion. And the company’s total interest income rose 24.1% from its year-ago value to $606.31 million. Also, its loans increased a record $6.28 billion.

Mixed Profitability

SBNY’s 47.07% net income margin is 55.6% higher than the 30.25% industry average. Also, its 12.89% ROE is 0.4% higher than the 12.83% industry average, while it’s 0.78% ROA is 42.1% lower than the 1.34% industry average. And its 1.45% CAPEX/Sales is 12.1% lower than the 1.65% industry average.

POWR Ratings Reflect Uncertainty

SBNY has an overall C rating, which translates to Neutral in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

The stock has a grade of F for Value, which is consistent with its stretched valuation.

SBNY has a C grade for Stability, in sync with its 24-month beta of 1.25.

Among the 57 stocks in the  Northeast Regional Banks group, SBNY is ranked #56.

Beyond what I have stated above, one can also view SBNY’s grades for Quality, Growth, Momentum, and Sentiment here.

View the top-rated stocks in the Northeast Regional Banks group here.

Bottom Line

With Wall Street predicting as many as seven rate hikes this year, beginning next month, the near-term scenario seems highly volatile. Furthermore,  escalating geopolitical tensions are injecting further volatility into markets. Given SBNY’s high valuation and high beta, we think it could be wise to wait for more clarity in the Federal Reserve’s monetary policy pivot before investing in the stock.

How Does Signature Bank (SBNY) Stack Up Against its Peers?

While SBNY has an overall POWR Rating of C, one might want to consider taking a look at its industry peers, Unity Bancorp, Inc. (UNTY), Bankwell Financial Group, Inc. (BWFG), Parke Bancorp, Inc. (PKBK), which have a B (Buy) rating.

SBNY shares were unchanged in premarket trading Friday. Year-to-date, SBNY has gained 0.87%, versus a -9.82% rise in the benchmark S&P 500 index during the same period.

About the Author: Subhasree Kar

Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master’s degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics.


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