Why Signature Bank jumped 13.2% in February

What Come

Signature Bank ( SBNY -2.69% ) saw its stock price jump 13.2% in February, according to S&P Global Market Intelligence.

The New York-based bank outperformed most stocks during the month, the S&P500 was down 3.2% in February and the Nasdaq Composite fell 3.4% in the month. Signature Bank is up 2.5% year-to-date (YTD), while the S&P 500 is down 8% since March 3.

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So what

Signature Bank is a private bank for high net worth individuals and their businesses with approximately $118 billion in assets under management. It has 37 private client offices, mostly in major financial centers, mostly in the New York area. But it also has four offices in the Los Angeles area, two in the Charlotte/Durham area, and one in Connecticut and one in San Francisco. Additionally, Signature is one of only two banks in the country to have its own blockchain-based payment network – Signet. The Signet platform facilitates real-time cryptocurrency trading between institutional traders and crypto exchanges, with no transaction fees.

Both of these companies have experienced rapid growth. In the fourth quarter of 2021, deposits grew by $10.6 billion year-over-year to $106.1 billion, including $2.4 billion on the Signet platform. Additionally, loans grew by a record $6.3 billion in the last quarter. That led to record fourth-quarter net income of $272 million, or earnings per share (EPS) of $4.34, a 57% year-over-year increase. Even more impressive is the fact that this is the fifth consecutive quarter of record earnings for Signature. That’s incredible sustained growth.

Now what

Can Signature achieve six consecutive quarters of record year-over-year profits? It’s hard to say, but the bank is in an excellent position to continue its strong growth in the coming quarters and beyond. With Signet generating strong growth in deposits, the company expects continued growth in fee income as Signet stands to benefit from the growth in cryptocurrency investment as one of the early movers.

On the fourth quarter earnings call, COO Eric Howell expects commission revenue to grow 10% in the first quarter and 20% to 30% beyond that. In addition, the anticipation of successive increases in interest rates this year should stimulate its interest income. The bank is extremely well managed with a low efficiency ratio of 32.3% in the fourth quarter, compared to 35.4% in the third quarter and 37.6% in the fourth quarter of 2020.

It also continues to expand with plans for a new private client office in New Jersey in 2022 and the hiring of additional banking teams, primarily on the West Coast.

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