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'Storm Is Brewing' for Banks

Signature Bank
Shares of Signature Bank (SBNY - Get Report) of New York closed at $60.71 Monday, returning 1% year-to-date, following a 20% return during 2011. SBNY Chart SBNY data by YCharts

The shares trade for twice their tangible book value, according to Worldscope data provided by Thomson Reuters, and for 14.5 times the consensus 2013 EPS estimate of $4.18. The consensus 2012 EPS estimate is $3.65.

Analysts expect the bank to report second-quarter EPS of 89 cents, compared to 90 cents the previous quarter and 87 cents a year earlier.

Alexopoulos rates Signature Bank "Overweight," with a $75 price target, and said Tuesday that he expects the bank's "strong loan growth to continue," and for its second-quarter net interest margin to decline by two basis points to 3.48%. JPMorgan expects Signature Bank "to continue to be a standout on the loan growth front, with ~$550 million of period-end loan growth expected, or nearly 30% annualized growth."

Alexopoulos estimates that Signature Bank will earn $3.51 a share for all of 2012, followed by 2013 EPS of $3.81.

Signature Bank during the first quarter launched a special finance subsidiary called Signature Financial, hiring "of one of Long Island's most respected C&I-focused, middle market teams," according to CEO Joseph DePaolo.

Alexopoulos said on Tuesday that "although growth metrics from Signature are at best-in-class levels, over the past several quarters the market seems to have now grown accustomed to very strong balance sheet growth out of the company with SBNY shares lagging peers on the day of earnings being reported." The analyst went on to say that the bank's expansion of its lending team "couldn't have come at a better time," and that the new unit "seems to be positioned to add a cylinder or two to the company's loan growth engine."

Interested in more on Signature Bank? See TheStreet Ratings' report card for this stock.
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