With Weak Asset Beta And Rising Deposit Beta, Signature Bank Must Drive Loan Growth

Deposit beta is getting more and more attention these days with bank stocks, but asset betas are also important, and in the case of Signature Bank (SBNY), I’m worried about the company’s net-negative leverage to further rate increases. With little-to-no juice on the NIM line and no real fee income-generating business to speak of, Signature Bank’s growth is tied to its ability to grow the loan book. Luckily for investors, there are a lot of small(ish) privately-owned businesses that feel underserved by larger banks, and Signature is taking its show on the road and looking to open private banking offices on the West Coast.

Signature Bank is a different sort of bank, but there’s only so far “different” goes in terms of valuation. I’d pay a little more for a bank that is likely to earn 14% ROTCE in 2018 and generate double-digit earnings growth over the long term, but I worry that Signature may remain out of favor a little while longer as taxi medallion credit issues and asset sensitivity weigh on sentiment.

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With Weak Asset Beta And Rising Deposit Beta, Signature Bank Must Drive Loan Growth