Note

Crypto Bank Silvergate Capital Holds Up in the Crash. The Stock Soars.

Verified Official
· Views 56
Crypto Bank Silvergate Capital Holds Up in the Crash. The Stock Soars.

Positioning itself as a crypto bank, Silvergate Capital continues to grow its digital-asset business.

Ozan KoseAFP via Getty Images

Silvergate Capital showed continued strength in the second quarter of 2022, with the financial services group that has positioned itself as a “crypto bank” reporting record earnings despite a crash in digital assets.

Silvergate (ticker: SI) notched net income of $38.6 million in the June quarter, delivering earnings per share of $1.13. Wall Street had been expecting earnings of 84 cents a share for the quarter, based on the estimates of analysts polled by FactSet. Net income grew from $27.4 million in the prior quarter and $20.9 million a year ago.

Shares in Silvergate gained 20% on Tuesday.

While growth in the number of its crypto customers slowed slightly, Silvergate continued to add customers in this key segment, reaching 1,585 customers as of the end of June, up from 1,503 as of the end of March. Digital-currency customer-related fee income fell to $8.8 million from $8.9 million in the prior quarter and $11.3 million a year ago.

“Silvergate had another strong quarter in light of the challenging backdrop facing the broader digital-currency ecosystem,” Alan Lane, Silvergate’s president and chief executive, said in a statement.

While the crypto lending industry at large has come under severe stress, Silvergate said its Leverage solutions—which provide institutional access to U.S. dollar loans collateralized by Bitcoin —saw no losses or liquidations. Leveraged commitments increased to $1.4 billion as of the end of June, up from $1.1 billion at the end of the prior quarter.

The Silvergate Exchange Network, the bank’s instantaneous internal bank transfer network, handled $191.3 billion in U.S. dollar transfers in the three months to the end of June, up 34% from the prior quarter. 

“Our platform was built to support our clients in this relatively nascent industry during periods of high volumes, market volatility and transformation, and performed as designed throughout the quarter,” Lane said. “Our balance sheet is optimized for client liquidity and risk management practices are at the forefront in all aspects of our business.”

Amid a dramatic rout that has hit digital-asset markets, Silvergate’s average crypto customer deposits declined to $13.8 billion in the second quarter from $14.7 billion in the first three months of 2022. Bitcoin just capped its worst quarter since 2011—a year in which it crossed the $1 mark for the first time—and the total market capitalization of the crypto space has fallen to $1 trillion from nearly $3 trillion eight months ago.

The crypto crash has done no favors for Silvergate stock. Even after the best day of stock-price gains in almost nine months, shares in the group have tumbled more than 47% this year.

But Wall Street remains bullish on Silvergate. Eight out of nine analysts surveyed by FactSet have a Buy rating on the stock; one analyst rates it at Hold. The average target price on the stock among this group of analysts is $124.50, implying gains of 60% from current prices.

Write to Jack Denton at jack.dentondowjones.com

Disclaimer: The content above represents only the views of the author or guest. It does not represent any views or positions of FOLLOWME and does not mean that FOLLOWME agrees with its statement or description, nor does it constitute any investment advice. For all actions taken by visitors based on information provided by the FOLLOWME community, the community does not assume any form of liability unless otherwise expressly promised in writing.

FOLLOWME Trading Community Website: https://www.followme.com

If you like, reward to support.
avatar

Hot

No comment on record. Start new comment.