Analyst notes
New York-based Signature Bank's stock is expected to remain under pressure following Silvergate Capital Corp.'s decision to wind down and liquidate its banking subsidiary, Silvergate Bank.
Signature Bank and Silvergate are often mentioned in the same breath largely due to the companies' exposure to cryptocurrency, research analysts said.
Analysts at Wells Fargo highlighted that Silvergate was a mono-line provider to crypto whereas Signature Bank always had a diversified model, which allowed the New York-based bank to offset the liquidity pressures witnessed in the industry in the past year.
Signature Bank's Signet platform, which has many clients dealing in cryptocurrencies, accounts for only 15% of the total deposits at Signature Bank. That is much lower compared to Silvergate, where crypto was the "vast majority" of deposits, according to Piper Sandler analysts Mark Fitzgibbon and Gregory Zingone.
"We continue to believe that for patient, longer-term investors, SBNY shares are an extraordinary value today trading at only about 80% of P/TBV and 6x consensus 2023 EPS estimates based upon today's pre-market price," the analysts wrote.
Signature Bank is trading at 0.89x tangible book value, according to S&P Global Market Intelligence data. Signature Bank's stock was down by more than 8% to $94.67 as of 12:04 p.m. ET.
The Piper Sandler analysts believe that Signature Bank is "dramatically different" compared to Silvergate, and there are no concerns about Signature Bank's "viability in the short, medium or long-term."
Signature Bank is not involved in crypto-backed lending nor does the bank serve as a custodian for crypto assets, which is in contrast with Silvergate's likely involvement with both aspects of the crypto industry.
Moreover, Signature Bank's balance sheet is 10x bigger than Silvergate's balance sheet and also has a lot of different deposit verticals to rely on, the Piper Sandler analysts noted.
With Silvergate's exit from the crypto space, Signature Bank has emerged as the "only larger bank remaining with a functional on-ramp for institutional crypto investors," Wells Fargo analysts Jared Shaw, Timur Braziler and Jonathan Rau wrote in a March 8 note.
This could provide Signature Bank with "some incremental pricing power" and the bank could use Silvergate's exit "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," the Wells Fargo analysts noted.
Dropped coverage
Wells Fargo dropped the coverage of Silvergate following the company's decision to wind down its banking operations.
