Signature Bank Earns $2.43 per Share
Posted by Eddy Elfenbein on January 18th, 2018 at 1:03 pm

On Thursday morning, Signature Bank (SBNY) reported adjusted Q4 earnings of $2.43 per share which was well above Wall Street’s estimate of $2.23 per share. I call the earnings “adjusted” because the bank took a charge last quarter of $37 million due to their lousy medallion loan business.

Let’s dig into some numbers. Last year SBNY’s total assets rose by 10.4% to reach $43.12 billion, and deposits rose by 5% to $1.58 billion. That’s quite good. For the year, Signature made $8.91 per share.

“2017 was a year during which our highly successful, single point of contact business model further distinguished Signature Bank in an exceedingly competitive marketplace. We continued to attract quality business relationships as evidenced by the growth in both our core deposits and loans. Notwithstanding our challenges in the taxi medallion business, we were able to achieve a double-digit return on equity,” explained Joseph J. DePaolo, President and Chief Executive Officer.

“Now with tax legislation becoming law and the positive effect we believe it will have on future earnings and capital, we look forward to the $50 billion SIFI threshold potentially moving higher, to at least $100 billion. This will allow the Bank to slow down the pace of expense growth. Realistically, Signature Bank, with its uncomplicated and straight-forward balance sheet, should not be subject to the same standards as a truly complex, systemically important trillion-dollar financial institution. We welcome 2018 as we plan to strengthen our foundation by making major investments in our loan operation and origination systems, payments architecture platform and new foreign exchange system. We also will look to expand our geographic presence in areas where we have significant client synergies, such as the West Coast, after we successfully tested the waters in 2017 with the appointment of a team and the opening of our new accommodation office in San Francisco,” he concluded.

For Q4, Signature’s “net interest margin on a tax-equivalent basis” bumped up to 3.07% from 3.05% in Q3. The bottom line is that, except for the medallion mess (which is being addressed), SBNY is doing quite well. Their provision for loan losses for Q4 was $41.7 million. That’s up 88% from last year. Thank you, medallions.

When looking at banks, there’s a key metric to watch which is called the “efficiency ratio.” It’s their overhead as a percent of revenue. (Signature defines their efficiency ratio as net interest expense divided by total income.) The efficiency ratio tells us how well run the bank is. The lower the number the better. As a general rule, anything below 50% is considered good. For Signature, their efficiency ratio last quarter was 33.5%. That’s very good, and it’s actually up from a year ago when it was 31.25%.

Traders were pleased by the report as shares of SBNY climbed Thursday morning to a seven-month high. Signature has been rebounding from a tough time during much of 2017. The stock is up more than 30% from its September low.

Morning News: January 18, 2018
Posted by Eddy Elfenbein on January 18th, 2018 at 7:07 am

Shorts on Top as January Cboe Bitcoin Futures Settle

Cryptocurrency Prices Steady With Ripple Bouncing Back 30% After ‘Severe’ Sell-Off

Oil Briefly Weakens, But $80 Brent Is Plausible

China’s Economic Growth Last Year Was Even Better Than Expected

Weaker Dollar Won’t Derail Global Growth

Dumped Cars, EV Dreams: What We Learned at the Detroit Auto Show

How Emirates Airline Just Singlehandedly Saved the Airbus A380

Apple, Capitalizing on New Tax Law, Plans to Bring Billions in Cash Back to US

Bank of America Earnings Hurt by Tax-Related Charge

Nestle’s Is Launching New KitKats and They’re Made From Natural Ruby Chocolate

Qualcomm Challenges Broadcom Where It Counts Most – Networking

Intel Has a Big Problem. It Needs to Act Like It.

Ben Carlson: Even With Low Returns, Bonds Still Have Their Use

Roger Nusbaum: Chip Off The Old Block…Chain

Joshua Brown: How a Criminal Defense Attorney Thinks About Crypto Currency

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AFLAC Waddles Back
Posted by Eddy Elfenbein on January 17th, 2018 at 1:50 pm

Here are three charts I wanted to pass along. The first shows that AFLAC is taking back some of its losses from Friday.

Here’s an interesting chart. This show the divergence between oil (red) and the relative strength of energy stocks (black). These two had been following each other closely until about a year ago. Since then, oil has rebounded but energy stocks are still weak.

Lastly, here’s the S&P 500’s dividend yield (in red) along with the one-year Treasury yield (blue).

Related:

Industrial Production Soars 0.9% in December
Posted by Eddy Elfenbein on January 17th, 2018 at 11:23 am

Next week, we’re going to get our first look at the Q4 GDP report, and it could be a good one. We got a sneak preview today with the industrial production report for December. It said that industrial production increased by 0.9% last month. Economists were expecting just 0.4%.

The industrial sector is being supported by a strengthening global economy and a weakening dollar, which is helping to make U.S. exports more competitive relative to those of the nation’s main trading partners. A survey early this month showed an acceleration in factory activity in December, with a measure of new orders recording its best reading since January 2004.

Mining production increased 1.6 percent amid a rebound in oil and gas well drilling. Utilities production accelerated 5.6 percent last month after declining 3.1 percent in November.

Bitter cold gripped a large part of the country at the end of December. The surge in utilities demand bodes well for consumer spending in the fourth quarter.

Industrial production is important to watch because the data started to decline in November 2014 and bottomed out in March 2016. Since then, industrial production has ground its way higher and has started to accelerate in recent months.

In the past ten years, industrial production has increased by 2%.

Morning News: January 17, 2018
Posted by Eddy Elfenbein on January 17th, 2018 at 7:05 am

Beware the $500 Billion Bond Exodus

What Could Kill the Bitcoin Boom

Did Bitcoin Just Burst? How It Compares to History’s Big Bubbles

World’s Largest Money Manager to CEOs: You Must Do Good for Society

At Retail Trade Show, Technology is the Star

Nutella Maker to Pay $2.8 Billion for Nestle U.S. Candy Unit

IBM Forges Global Joint Venture With Maersk Applying Blockchain To ‘Digitize’ Global Trade

Why Breaking Up General Electric May Be Hard to Do

Nissan Is Turning Infiniti into an Electric Luxury Brand

Ferrari Is Planning to Bring an Electric Supercar to Market

Why New Tax Law Cost Citigroup, GM $29 Billion

Bank of America Profit Slumps on $2.9 Billion Tax Charge

Joshua Brown: What If the Price of Bitcoin Is the Least Interesting Thing About It?

Jeff Carter: Should Google, Facebook and Other Large Tech Firms be Broken Up?

Michael Batnick: Animal Spirits: Nobody Wants to Listen to Your Podcast

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Big Reversal Today
Posted by Eddy Elfenbein on January 16th, 2018 at 5:07 pm

The stock market had a big reversal today. I can’t remember the last one this big (and I’m too lazy to look it up.)

At one point this morning, the S&P 500 was up 0.76% to a new all-time high. We couldn’t hold on, and the index closed down 0.35%.

Crypto-Land had a very tough day. Bitcoin fell over $3,000 for a loss of 22%.

The S&P 500 Gets Modern
Posted by Eddy Elfenbein on January 16th, 2018 at 1:47 pm

S&P is making some important classification changes to the S&P 500, and I think it’s long overdue. I’ve never liked the Telecom sector as a stand-alone sector. The good news is that Telecom is being renamed Communication Services. They’re going to take the old Telecom stocks and add a bunch of “new media” stocks like Facebook, Alphabet, Comcast and Netflix.

I don’t know exactly how I’d classify a company like Facebook, but I suppose Communications is pretty good.

They’re also updating the Internet & Direct Marketing Retail Sub-Industry to include all “online marketplaces.” This will include companies like Alibaba and eBay.

This is going to blow a big hole in the Tech Sector (formally, the Information Technology). S&P is also going to take companies in the Internet Software & Services Sub-Industry and put then in a new Internet Services & Infrastructure Sub-Industry which will be under the IT Services Industry.

They’re going to take some companies currently labeled as Internet Software & Services and reclassify them as Application Software. This will ditch the current Internet Software & Services Industry and Sub-Industry. Good.

The new structure will have 11 Sectors, 24 Industry Groups, 69 Industries and 158 Sub-Industries.

Morning News: January 16, 2018
Posted by Eddy Elfenbein on January 16th, 2018 at 7:05 am

Bitcoin Tanks Below $12,000 as Regulators Plan New Cryptocurrency Rules

Oil Trades Near Three-Year High as Hedge Funds Increase Bullish Bets

Saudi Aramco Snubs UBS and Bank of America for Listing Roles

Inflation Falls Back For First Time Since June as Brexit Hit Wanes

This Year Looks Different for U.S. Inflation as Wall St. Braces

The Senate’s Push to Overrule the FCC on Net Neutrality Now Has 50 Votes, Democrats Say

Investors Can’t Get Enough of the Metal Used to Cut Vehicle Pollution

U.S. Lawmakers Urge AT&T to Cut Commercial Ties with Huawei

BP to Book $1.7 Billion Charge for Deepwater Horizon Claims

Chinese Carmaker May Use Fiat Chrysler for Foothold in United States

Black Rock’s Message: Contribute to Society, Or Risk Losing Our Support

Raine Takes a Stake in `Planet of the Apps’ Creator

Roger Nusbaum: Maven Recap

Cullen Roche: Will Centralized Entities Ruin the Decentralized Party?

Howard Lindzon: Group Frenzy and Hilariously Rich

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MLK’s “Street Sweeper” Speech
Posted by Eddy Elfenbein on January 15th, 2018 at 10:19 am

Dr. King was born 89 years ago today.

Ecclesiastes 9:10

Whatsoever thy hand findeth to do, do it with thy might; for there is no work, nor device, nor knowledge, nor wisdom, in the grave, whither thou goest.

Morning News: January 15, 2018
Posted by Eddy Elfenbein on January 15th, 2018 at 7:07 am

Pressure Rising on OPEC to Develop Long-Term Output Plan

These Digital Coins Soar (or Fall) With Bitcoin

China Escalates Crackdown on Cryptocurrency Trading

Hedge Funds Are Making Money From Exotic Bets

Carillion Collapses After U.K. Government Refuses Bailout

Detroit Auto Show May Be Celebrating An Era About to End

Ford Will Invest $11 Billion by 2022 To Launch 40 New Electric Cars and Hybrids Worldwide

Alibaba’s AI Outguns Humans in Reading Test

Big Bets on A.I. Open Up a New Frontier for Chip Start-Ups, Too

SoftBank Flirts With Wireless Unit IPO that Could Be Japan’s Biggest in Two Decades

Unlocking the Airbus A380 Success

Lego Plans Video Games, Social Network for Chinese Children

Jeff Miller: A Confusing Earnings Season

Jeff Carter: There Is One Bear Market

Ben Carlson: Updating My Favorite Performance Chart for 2017

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