Analysis of Signature Bank Stock

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Does Bank Investing Make Bank?

Signature Bank (SBNY) is a full service commercial bank (personal/business, investment, brokerage, asset management and insurance products are all available). It is a mid-cap bank in the northeast region and is in the financial services sector. Over the coarse of the current year SBNY has had one of the best performances for a bank stock across the industry and outperforming the S&P500 TR last quarter. For this reason, SBNY’s P/E and P/B ratio are massive and unappealing. This is signifying that the stock is over-valued and expected to grow.

SBNY has the second largest market capitalization in its industry of $4.3 billion. ,Yes that is right, there is only one large cap firm in commercial banking; MTB. So, if SBNY evolves into a large cap, purchasing the stocks right now would be a very profitable decision. But, the industry norm of mid-cap companies suggests that the one large cap could possibly be an outlier.

Although the company’s, revenue, net income, and EPS are below industry average, they are all growing figures (when moving with respect to time), which is ultimately the most important factor. SBNY has the fourth best ranking in the Long Term Growth Rate (5yr) forecasts within the industry. This forecast must be taken with a grain of salt though so its actual value is not as important as the rank.

The banking industry and more notably the entire financial sector’s market forecasts are negative. Treasury rates are down, interest is at an all time cyclical low which is inviting for customers but bad for profitability. With a more careful look it is clear that much of SBNY’s asset portfolio is made up of real estate and mortgages. These mortgage yields comprise a lot of the company’s annual profits. An assumption of mine (primed by an economics’ coarse, eventually self-formulated) I strongly believe that we are on the edge of another housing bubble. I believe that the housing market will see serious a...
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