Signature Bank’s Crypto Outflows Mitigated by Growth in Core Deposits, Wedbush Says

The biggest takeaway from Signature Bank’s (SBNY) mid-quarter update is that spot deposits fell by $1.64 billion, fueled by outflows in digital asset banking that totaled $4.27 billion, broker Wedbush said in a research report Tuesday.

Wedbush maintained its outperform rating on the stock, but trimmed its price target for the company to $225 from $240. SBNY shares traded up 1% to $170 on Wednesday.

The “silver lining” is that core business deposits excluding digital assets increased by $2.64 billion for the quarter to date, the broker said. Given recent volatility in the cryptocurrency market, this should be viewed as a relief for investors who may have been expecting larger overall outflows, Wedbush added.

Much of the anticipated fall in deposits should already be reflected in Signature’s relative valuation, the report said, noting that crypto prices have begun to stabilize recently.

The $4.3 billion contraction in crypto-related deposits was steeper than estimated but not a surprise, Raymond James said in a report, also on Tuesday. The bank’s growth is not dependent on “digital currency ecosystem growth,” the note said, adding that while the firm’s exposure to the cryptocurrency ecosystem remains a headwind, since the end of 2019 it has grown loans at an annualized rate of 25.4% and deposits (ex-digital assets) by 26.3%.