After the collapse of Silvergate Capital, the market is asking a key question. Is there another crypto-bank that could be at risk? Speculators' eyes are still looking towards Signature Bank but Wells Fargo believes that the bank has some chances to stay in the market.
- Signature Bank (SBNY.US) benefited from being 'crypto-friendly' in the recent bull market. Its share price has now almost completely erased the gains since the start of the crypto bull market (fall 2020);
- The bank has recently reduced its exposure to the cryptocurrency sector, and the US Department of Justice is not investigating it. There is also no information on a possible merger with FTX / Alameda Research;
- The bank announced a $55 million buyback of its own shares this week. Wells Fargo analysts have commented positively on its business;
- Signature Bank's share price may react positively to a possible rebound in the cryptocurrency market but sentiment is still weighed down by concerns around a potential systemic crisis among US banks. The bank can have a problem if the crisis will continue because of huge unrealized loss on its bond portfolio (more than 27% loss, 6th place among US banks).
- For the moment, assessing the bank's financial health is difficult, investors are forced to rely on the company's report and commentary.
Start investing today or test a free demo
Open real account TRY DEMO Download mobile app Download mobile appShort positions on Silvergate Capital shares have increased by leaps and bounds since the collapse of FTX, with speculators noting that things could get worse with the bank. Currently, the number of short-sold Silvergate shares (short interest) is close to 80% and was already relatively high (over 12%) before the collapse of FTX. For Signature Bank, 'short interest' is currently around 6%, indicating that speculators are still afraid to gamble on declines, despite the huge sell-off and controversy surrounding the bank's shares. This may signal some market inefficiency and is potentially a positive sign. Source: Bloomberg
- In its March 8 financial report, the bank reaffirmed its strong financial position and pointed to limited balances related to cryptocurrencies. It has more than $100 billion in diversified assets. It has a TIER 1 ratio of 10.42 and exceeds regulatory requirements;
- Its investment-grade long-term and short-term credit ratings were recently affirmed by Fitch Ratings and Moody's. In January, it announced a 25% increase in its dividend to $2.8;
- Deposit balances amounted to $89.17 billion, increasing by $576 million since the end of 2022. The bank is carrying out a targeted reduction of $1.27 billion in customer deposits related to digital assets, resulting in a balance of $16.52 billion in customer deposits related to digital assets.
"Signature Bank does not invest in, trade, hold, store or lend against pledges or loans secured by digital assets." - indicated the bank's CEO, DePaolo.
The share price of Silvergate Capital (SI.US, yellow) and Signature Bank are still moving in almost the same range however, the second one seems to be healthier than market thinks. The RSI indicator stands at 26 points and signals an oversold area. Source: xStation5
