• Signature Bank closed by US financial regulator
• Signature Bank withdrawing from the crypto sector
• Despite the Silvergate debacle, JPMorgan remained optimistic for a long time
Even after the well-known crypto bank Silvergate Capital caused eruptions in the crypto market by ending its business operations, JPMorgan experts initially stuck to their optimistic assessment of the industry colleague Signature Bank. In a note to clients in early March, JPMorgan analysts reiterated their “Overweight” rating on Signature Bank shares. In the meantime, however, the New York bank has been closed by the US financial regulator and the share has been suspended from trading.
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Signature Bank shares: Until recently, analysts issued buy recommendations
Most of the experts from various banks listed on TipRanks recently issued a buy recommendation for Signature Bank (rating “moderate buy”). Of the 11 analysts who have rated the paper over the past three months, the New York-based bank received seven “buy”, three “hold” and one “sell” ratings. According to TipRanks, the middle price target was $145.90, around 108 percent above the last closing price of $70 (as of the closing price on March 10, 2023).
Signature Bank Q4 2022 figures showed revenue of $683.90 million, a 20.11 percent increase in revenue compared to the same quarter last year, for full year 2022, Signature reported revenue of $2.00 billion Significantly increase $2.70 billion.
In their justification for the buy recommendation, according to Yahoo Finance, JPMorgan analysts emphasized that the bank had recently further deliberately reduced its crypto commitment. This runs like a red thread through the strategy, whereby the experts were impressed that the financial institution from New York – and not the markets – set the pace of the reductions.
Signature Bank: Reduction of crypto exposure
In its mid-quarter report, the New York-based financial institution reiterated that “Signature Bank does not trade, hold, or make loans backed by digital assets.”
Signature’s withdrawal from its involvement in Bitcoin, Ethereum and Co. is having a wider impact: At the beginning of February, Binance announced that it would suspend bank transfers in US dollars. Shortly thereafter, reports accumulated that the Binance banking partner Signature could be the reason. Because the bank had previously processed international transfers via the SWIFT system for Binance, but not for Binance.US, and had announced that it would only make transfers of more than 100,000 US dollars to or from crypto exchanges.
In its mid-quarter update, the bank also announced that the decrease in deposits in the spot market in the first two months of this year was largely due to the deliberate reduction in crypto deposits – in the amount of $1.51 billion. During the same period, deposits not related to digital assets increased by $682 million. Signature also reduced its loan balances in January and February 2023 by $200 million more than JPMorgan expected, to $1.7 billion.
In summary, the analysts therefore stated: “Once the industry has processed the difficult deposit environment and the uncertainty decreases, we see that Signature’s current discount valuation will be replaced by a multiple that more closely reflects the long-term growth potential of the business.”
The entire banking sector has come under pressure following recent events. The JPMorgan analysts, like those of other banks, will have reconsidered their optimistic assessment in the meantime.
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