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Signature Bank (SBNY) to Reduce Crypto Exposure by $8-$10B

After achieving significant growth from accepting crypto deposits, Signature Bank SBNY recently announced at an industry conference that it would reduce deposits tied to cryptocurrencies by $8 billion to $10 billion. The move comes in light of falling token prices and the FTX-inflicted turmoil in the cryptocurrency market, which has also resulted in significant price volatility for SBNY.

As of Nov 14, 2022, Signature Bank’s deposit balances in the digital asset space amounted to $23.5 billion or roughly 24% of total deposits. The company previously noted that it only has a deposit relationship with FTX. The crypto exchange’s deposits made less than 0.1% of the company’s overall deposits.

Signature Bank is one of the only federally regulated U.S. banks known to have accepted large-scale crypto deposits and crypto exchanges, stablecoin issuers and bitcoin miners as customers. These helped the bank scale its deposits in the past.

However, the crypto values erosion from the November 2021 highs, the recent liquidity crunch and the FTX bankruptcy have contributed to weakened investor confidence in the digital asset space. Shares of the company have plunged 63.3% year to date, underperforming the industry’s loss of 17.3%.

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Zacks Investment Research

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Hence, the bank’s move to eventually reduce digital asset-related deposit exposure to less than 15% and exit stablecoins as a business will help shift investors’ focus from its crypto-related business. Also, SBNY plans to cover the aggressive reduction in deposits by reducing cash and increasing borrowings.

In an update provided in November, Signature Bank’s management noted that the bank is a well-diversified institution, which employs appropriate risk management strategies to help it navigate the current challenging digital asset landscape.

Also, its robust capital position, solid earnings capacity and overall diversification should be seen as positives for its depositor clients. Investors should note that Signature Bank’s deposit base (excluding digital assets) has grown significantly over the past few years.

Deposits and net loans witnessed a five-year (2017-2021) compound annual growth rate of 33.5% and 18.7%, respectively. The company has achieved growth in deposits every year since its inception in 2001. It stays focused on increasing deposits across its New York operations.

SBNY currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Stocks to Consider

A couple of better-ranked stocks from the finance space are Hancock Whitney Corporation HWC and F.N.B. Corporation FNB. At present, HWC and FNB each carry a Zacks Rank #2 (Buy).

The Zacks Consensus Estimate for Hancock Whitney’s 2022 earnings has moved 1.5% upward over the past 60 days. So far this year, HWC shares have risen 3%.

The Zacks Consensus Estimate for F.N.B. Corp’s 2022 earnings has moved 3.8% upward over the past 60 days. FNB shares have rallied 6.2% in the year-to-date period.

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