Market Overview

JPMorgan Downgrades Signature Bank: 'We Would Lock In Losses And Trim Exposure'

Share:
JPMorgan Downgrades Signature Bank: 'We Would Lock In Losses And Trim Exposure'

Signature Bank (NASDAQ: SBNY) reported a sharp increase in earnings Thursday in its second-quarter report, helped by a decrease in the provision for loan losses, with most of it tied to the New York City taxi medallion portfolio.

The Analyst

JPMorgan analyst Steven Alexopoulos downgraded shares of Signature Bank from Overweight to Neutral and lowered the price target from $150 to $130.

The Thesis

The credit challenge arising out of the taxi medallion portfolio is now behind Signature Bank, but net interest margin pressure is likely to keep a lid on the shares, Alexopoulos said in a Friday note. (See the analyst's track record here.) 

The analyst projects another re-rating in shares as the commercial real estate lending environment turns irrational. The company is likely to see intensified volatility in its return from deposits, as over 50 percent of deposits are parked in money market accounts, Alexopoulos said. 

The spread between two-year and 10-year notes is in the tightest range in over a decade and is likely to become even flatter over the next few months, the analyst said.

Net interest margin pressure at Signature Bank is likely to get worse before it gets better, Alexopoulos said. Another noteworthy risk is the intensifying competition for CRE lending, he said. 

"Although SBNY shares might appear 'cheap' on the surface, given the prospects that this former 'beat-and-raise' story now becomes more of a 'miss-and-lower' name, we would lock in losses and trim exposure." 

JPMorgan no longer sees the roadmap for company outperforming its peers, Alexopoulos said. The firm lowered its EPS estimates for 2018-2020. 

The Price Action

Signature Bank shares have shed about 14 percent year-to-date.

Related Links:

Banks And Credit Unions Working With Cannabis Business In The U.S.

Another Leveraged Bank ETF With Upcoming Earnings Opportunities

Latest Ratings for SBNY

DateFirmActionFromTo
Oct 2019MaintainsOutperform
Aug 2019MaintainsOverweight
Jul 2019UpgradesOutperformStrong Buy

View More Analyst Ratings for SBNY
View the Latest Analyst Ratings

Posted-In: JPMorgan Steven AlexopoulosAnalyst Color Earnings News Downgrades Price Target Analyst Ratings Best of Benzinga

 

Related Articles (SBNY)

View Comments and Join the Discussion!
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Trading Daily
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at vipaccounts@benzinga.com

Another War Is On, This Time Between Dividends And Bonds

A Private Equity Investor Explains What Got Him Into Cannabis