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Signature Bank (SBNY) Q3 Earnings Beat, Revenues Rise Y/Y
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Signature Bank (SBNY - Free Report) reported third-quarter 2022 earnings per share (EPS) of $5.57, beating the Zacks Consensus Estimate of $5.42. Also, the bottom line increased a whopping 43.5% from the prior-year quarter’s reported number. We had projected EPS of 5.34 for the reported quarter.
The results were supported by a significant increase in net interest income (NII) and fee income. However, the rise in non-interest expenses was a matter of concern.
The net income in the quarter came in at a record high of $358.5 million, up from the previous-year quarter’s $241.4 million. Pre-tax pre-provision earnings were $492.3 million, up 48.7% year over year.
Revenues, Loan & Expenses Rise
The total income increased 40.1% from the prior-year quarter to $717.7 million. However, the top line lagged the Zacks Consensus Estimate of $730.9 million. Our estimate for the same was pegged at $690.8 million.
NII climbed 40.2% year over year to $674.0 million, mainly due to a rise in average interest-earning assets, higher prevailing interest rates and utilization of excess cash. Moreover, the reported figure surpassed our estimation of $648.9 million. The net interest margin increased to 2.38% in the third quarter of 2022 from 1.88% a year ago.
The non-interest income was $43.8 million, up 39.5% from the year-ago quarter’s number. Growth in fees and service charges and other income, including foreign currency activity and mark-to-market gains related to non-hedging derivatives, led to the increase in overall non-interest income.
The non-interest expenses of $225.5 million rose 24.4% from the prior-year quarter. The upsurge chiefly stemmed from the addition of new private client banking teams, national banking practices and operational personnel, and expenses related to client activity that have increased with the growth in clients and businesses.
The efficiency ratio was 31.4%, declining from 35.4% reported as of Sep 30, 2021. A lower ratio indicates a rise in profitability.
Loans, excluding loans held for sale as of Sep 30, 2022, were $73.8 billion, up 2.6% sequentially. Total deposits in the third quarter decreased $1.34 billion to $102.78 billion.
Credit Quality Improves
The allowance for credit losses for loans and leases was $464.8 million, down from $500.8 million in the prior-year quarter. The ratio of non-accrual loans to total loans was 0.25%, down 3 basis points (bps) year over year. Further, the net charge-offs were $10.2 million in the third quarter, down from $17.3 million.
However, the provision for credit losses increased to $29.1 million from $4 million in the prior-year quarter, driven primarily by deteriorating macroeconomic conditions.
Strong Profitability Ratio, Weak Capital Ratios
The return on average total assets was 1.24% in the reported quarter, up from 0.93% in the year-earlier quarter. As of Sep 30, 2022, the return on average common stockholders' equity was 18.42%, up from 13.63% in the year-ago quarter.
However, as of Sep 30, 2022, Tier 1 risk-based capital ratio was 10.76%, down from 11.53% as of Sep 30, 2021. The total risk-based capital ratio was 11.99%, down from the prior-year quarter’s 12.96%.
Our Take
Signature Bank reported decent results in the third quarter, primarily driven by growth in NII and fee income. Furthermore, the company’s credit quality improved from the prior-year quarter, and there was solid growth with respect to loans. With the gradual rising rates, the company’s NII and margins are positioned to increase, which is encouraging. However, escalating expenses from private client banking team expansions will ail bottom-line growth in the forthcoming quarters.
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Signature Bank (SBNY) Q3 Earnings Beat, Revenues Rise Y/Y
Signature Bank (SBNY - Free Report) reported third-quarter 2022 earnings per share (EPS) of $5.57, beating the Zacks Consensus Estimate of $5.42. Also, the bottom line increased a whopping 43.5% from the prior-year quarter’s reported number. We had projected EPS of 5.34 for the reported quarter.
The results were supported by a significant increase in net interest income (NII) and fee income. However, the rise in non-interest expenses was a matter of concern.
The net income in the quarter came in at a record high of $358.5 million, up from the previous-year quarter’s $241.4 million. Pre-tax pre-provision earnings were $492.3 million, up 48.7% year over year.
Revenues, Loan & Expenses Rise
The total income increased 40.1% from the prior-year quarter to $717.7 million. However, the top line lagged the Zacks Consensus Estimate of $730.9 million. Our estimate for the same was pegged at $690.8 million.
NII climbed 40.2% year over year to $674.0 million, mainly due to a rise in average interest-earning assets, higher prevailing interest rates and utilization of excess cash. Moreover, the reported figure surpassed our estimation of $648.9 million. The net interest margin increased to 2.38% in the third quarter of 2022 from 1.88% a year ago.
The non-interest income was $43.8 million, up 39.5% from the year-ago quarter’s number. Growth in fees and service charges and other income, including foreign currency activity and mark-to-market gains related to non-hedging derivatives, led to the increase in overall non-interest income.
The non-interest expenses of $225.5 million rose 24.4% from the prior-year quarter. The upsurge chiefly stemmed from the addition of new private client banking teams, national banking practices and operational personnel, and expenses related to client activity that have increased with the growth in clients and businesses.
The efficiency ratio was 31.4%, declining from 35.4% reported as of Sep 30, 2021. A lower ratio indicates a rise in profitability.
Loans, excluding loans held for sale as of Sep 30, 2022, were $73.8 billion, up 2.6% sequentially. Total deposits in the third quarter decreased $1.34 billion to $102.78 billion.
Credit Quality Improves
The allowance for credit losses for loans and leases was $464.8 million, down from $500.8 million in the prior-year quarter. The ratio of non-accrual loans to total loans was 0.25%, down 3 basis points (bps) year over year. Further, the net charge-offs were $10.2 million in the third quarter, down from $17.3 million.
However, the provision for credit losses increased to $29.1 million from $4 million in the prior-year quarter, driven primarily by deteriorating macroeconomic conditions.
Strong Profitability Ratio, Weak Capital Ratios
The return on average total assets was 1.24% in the reported quarter, up from 0.93% in the year-earlier quarter. As of Sep 30, 2022, the return on average common stockholders' equity was 18.42%, up from 13.63% in the year-ago quarter.
However, as of Sep 30, 2022, Tier 1 risk-based capital ratio was 10.76%, down from 11.53% as of Sep 30, 2021. The total risk-based capital ratio was 11.99%, down from the prior-year quarter’s 12.96%.
Our Take
Signature Bank reported decent results in the third quarter, primarily driven by growth in NII and fee income. Furthermore, the company’s credit quality improved from the prior-year quarter, and there was solid growth with respect to loans. With the gradual rising rates, the company’s NII and margins are positioned to increase, which is encouraging. However, escalating expenses from private client banking team expansions will ail bottom-line growth in the forthcoming quarters.
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.
Signature Bank Price, Consensus and EPS Surprise
Signature Bank price-consensus-eps-surprise-chart | Signature Bank Quote
Earnings Release Dates of Other Banks
Fifth Third Bancorp (FITB - Free Report) is slated to report third-quarter 2022 results on Oct 20.
The Zacks Consensus Estimate for Fifth Third’s third-quarter earnings of 98 cents indicates a 4.3% rise from the prior-year quarter.
Citizens Financial Group (CFG - Free Report) is slated to report third-quarter 2022 results on Oct 19.
The Zacks Consensus Estimate for Citizens Financial’s third-quarter earnings of $1.22 is flat year over year.