Signature Bank, one of the most crypto-friendly banks in Wall Street considered a competitor to Silvergate Bank, has had its stock SBNY downgraded by Jefferies, the US investment banking company. Signature Bank shares went down to $116 on Monday. At press time, it had climbed up to a little over $118.
Jefferies downgraded SBNY from “buy” to “hold” following a 67% slump in share price year-over-year, reports Market Beats. SBNY price target was also reduced to $124 from $185. This is after Signature Bank decided to shrink its digital assets deposits from $18billion to $10billion.
According to Jefferies’ Ken Usdin in a report, Jefferies is concerned about the negative impact on net interest margin (NIM) and net interest income (NII) that Standard Bank’s decision to shrink its digital asset deposits would have.
Not a surprise to see Signature Bank minimizing its exposure to the crypto industry
Considering that the crypto industry—at least as far as prices are concerned—has been experiencing a fall since the FTX collapse, it is not very surprising to see Signature Bank shrinking its digital asset deposits business.
In December 2022, Signature Bank had announced that it would reduce crypto-related deposits by $10billion. This represents about 23.5% of Signature Bank’s crypto-related deposit at the time. Signature Bank’s overall deposits stand roughly at $103billion.
But Signature Bank, like Silvergate Bank, is not leaving the crypto industry; only derisking.
“We are not just a crypto bank and we want that to come across loud and clear”, emphasized Signature Bank’s CEO Joe DePaolo at a Goldman Sachs-hosted investor conference in New York.
Signature Bank’s plan is to focus on generating growth in its core businesses and use that to pay down some borrowings. Followers, including Jefferies, expect this to take some time.
While Signature Bank may continue to gradually minimize its exposure to crypto, it is doubtful whether this will change or affect the bank’s stablecoin business Circle. Circle added Signature Bank as its financial institution for USDC reserve deposits in April 2021.
One major implication for crypto investors is that the crypto market is not about to disappear (at least not overnight, even for the most pessimist of crypto followers). But crypto-focused banks will understandably try to derisk as safely as they possibly can. This is expected to have some effect on the level of trust and confidence in the crypto industry, and consequently the crypto market.
Signature Bank stock hit a maximum value of $365.39 on 14 January 2022 when it announced its public stock offering. On 13 June 2022, SBNY dropped by 13.67% following bitcoin price drop. And after Signature Bank disclosed minimal exposure to FTX which is reportedly less than 0.1% of the bank’s total deposits, SBNY price rallied by 6.61%.