Crypto markets have been rocked by the liquidation of Silvergate Bank and the troubles faced by Silicon Valley Bank (SVB), but market analysts believe Signature Bank (SBNY) may be a potential buy as it’s the “last game in crypto-town,” according to Wells Fargo equity analyst Jared Shaw. Silvergate’s demise saw SBNY shares drop more than 13% as Wall Street opened for trading on Friday.
Piper Sandler and Wells Fargo Analysts Believe Signature Bank Is an Investment Opportunity
Cryptocurrency traders experienced a tumultuous week following the announcement of Silvergate Bank’s failure on March 8, 2023. The crypto-friendly institution informed the public that it was winding down its operations and liquidating its assets.
Silicon Valley Bank (SVB) also faced financial hardships, and was forced to issue a $21 billion bond at a loss of $1.8 billion. SIVB, SVB’s stock, was halted on March 10, 2023, after a decline of more than 60% the previous day. On Friday, regulators shut down Silicon Valley Bank, and the U.S. Federal Deposit Insurance Corporation (FDIC) took over as receiver, creating the “Deposit Insurance National Bank of Santa Clara.” The new entity holds FDIC-insured deposits from SVB.
On Friday, Signature Bank (Nasdaq: SBNY) saw a decrease of over 13% in trading, but by 11:30 p.m. (ET), losses had dropped to 8.55%. Piper Sandler market analysts Mark Fitzgibbon and Gregory Zingone noted on Thursday that “Since Signature Bank’s Signet platform also had numerous cryptocurrency clients, the two banks were frequently mentioned together. Consequently, we are confident that Signature’s stock will continue to be under some pressure in the short term.”
The Piper Sandler analysts also observed that Signature’s balance sheet is significantly larger than Silvergate’s, and that SBNY has “many other deposit verticals to depend on.”
Jared Shaw, an equity analyst at Wells Fargo, wrote about Signature Bank and suggested that the stock might be an opportunity. “Signature [is the] last game in crypto-town,” Shaw said. “It is the only larger bank that still has a functioning on-ramp for institutional cryptocurrency investors. While SBNY has restricted its exposure to this area, this could provide some additional pricing power.” The Wells Fargo analyst went on to say:
Additionally, SBNY could use this as a catalyst to move away from in-kind deposits for service to a fee-for-service model, which may be more regulatory and capital friendly.
Shaw’s investor memo suggests that SBNY’s strategies may be superior to Silvergate’s, and that providing banking services to cryptocurrency firms was not the primary reason for Silvergate’s financial issues. The Wells Fargo analyst also noted, however, that SBNY’s exposure to cryptocurrency assets is more restricted.
“The difficulty for SI was being a mono-line provider to cryptocurrency,” Shaw’s investor memo concludes. “At the end of the year, SBNY limited its exposure to cryptocurrency to 15% of deposits, which should help to decrease liquidity volatility, as we saw in ’22.”
What do you think about the future of banking in the cryptocurrency industry, and do you believe Signature Bank is well-positioned to take advantage of this emerging market? Share your thoughts in the comments below.
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