Signature Bank Shares Soar on Upbeat Q1 Earnings; Stock Has Over 25% Upside Potential

Signature Bank shares surged over 9% on Wednesday after the company reported better-than-expected earnings and revenue in the first quarter of this year, primarily driven by an increase in net interest income, fueled by strong average deposit & loan growth and absence of a higher provision for credit losses.

The New York-based full-service commercial bank said its net income for the first quarter of 2021 rose to $190.5 million, or $3.24 diluted earnings per share, versus $99.6 million, or $1.88 diluted earnings per share, for the 2020 first quarter. That was higher than the Wall Street consensus estimates of $2.85 per share.

The bank’s revenue jumped to $439.21 million during the quarter ended March 2021, beating analysts’ expectations of $428 million and up from $362.44 million seen in the same period a year ago.

Following the upbeat results, Signature Bank shares surged over 9% to $239.27 on Wednesday. The stock rose about 70% so far this year.

Analyst Comments

“EPS beat, but mostly due to a large tax gain and higher fee income. Provision expense was slightly higher than expected. However, asset growth was very impressive, with the company bringing on $10.7 billion of deposits, up 17% Q/Q. The new team hires suggest upside to loan growth in 2022,” noted Ken Zerbe, equity analyst at Morgan Stanley.

“The one area where SBNY stood out negatively versus peers was with its $31 mil provision expense (compared to our estimate of $24 mil), which reduced EPS by $0.08. Most other banks, by contrast, have been taking large reserve releases in 1Q21. That said, SBNY’s reserve ratio is just 1.02%, which is at the very low end of its peers, suggesting that it has far less reserves to release versus other banks. The company seems hesitant to release reserves more meaningfully until it sees greater improvement in the Manhattan commercial real estate market, given its large CRE concentration there, which is only starting to open up again.”

Signature Bank Stock Price Forecast

Thirteen analysts who offered stock ratings for Signature Bank in the last three months forecast the average price in 12 months of $265.58 with a high forecast of $300.00 and a low forecast of $165.00.

The average price target represents an 11.00% increase from the last price of $239.27. All Of those 13 analysts rated “Buy”, according to Tipranks.

Morgan Stanley gave the base target price of $280 with a high of $350 under a bull scenario and $200 under the worst-case scenario. The firm gave an “Overweight” rating on the commercial bank’s stock.

“SBNY has a unique business model, with its single-point-of-contact bankers, excellent credit culture, and a highly efficient operating structure. Its loan growth continues to outpace peers, given its relatively new focus on growing its PE/VC capital call lending business, while strategically de-emphasizing its NYC MF portfolio,” Morgan Stanley’s Zerbe added.

“While we do expect losses in SBNY’s CRE portfolio, we believe the market is overly discounting this in the stock price, particularly given its strong underwriting history and conservative lending.”

Several other analysts have also updated their stock outlook. Wedbush raised the stock price forecast to $305 from $280. Piper Sandler lifted their target price to $270 from $250. UBS upped the price objective to $281 from $275. BofA increased the price target to $300 from $275.

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