Metropolitan Bank Holding Corp. disclosed that one of its customers is a cryptocurrency exchange with average balances of $108 million and $137 million in two deposit accounts through the three-month period ending in October.
The amount of both accounts is about 16% of the $1.5 billion of Metropolitan Commercial Bank's total deposits as of Sept. 30.
The New York-based company made the disclosure in its quarterly filing with the Securities and Exchange Commission, saying it wanted to provide "further details" on its exposure to the growing cryptocurrencies industry given recent articles on the company. A Dec. 15 story from Bloomberg News said the cryptocurrency exchange Coinbase "is partnering" with Metropolitan Bank and two other banks, citing a person familiar with the matter.
Metropolitan did not disclose the name of the customer but said its relationship with the cryptocurrency exchange is part of its efforts to maintain a "diversified approach to generating deposits through a number of verticals." It also said the customer's deposits are of U.S. dollars, not a cryptocurrency.
PiperJaffray analyst Matthew Breese wrote in a research note the disclosure is a "potential double-edged sword" for Metropolitan's stock, noting it could lead to significant earnings growth but that cryptocurrency prices have been volatile.
"Given this dynamic we believe the bank's exposure is likely to excite some growth investors that are looking for more traditional ways to play in the cryptocurrency space without having direct exposure to the asset class," he wrote. "However, given the volatility and potential regulatory concerns surrounding cryptocurrencies, we believe the news may cause some trepidation for traditional depository investors."