Crypto Bank Silvergate Cut to Underweight at Morgan Stanley Following FTX Collapse

Already down more than 50% over the past month, the bank’s shares are lower by another 3% in premarket action Monday morning.

AccessTimeIconDec 5, 2022 at 2:06 p.m. UTC
Updated May 9, 2023 at 4:04 a.m. UTC
10 Years of Decentralizing the Future
May 29-31, 2024 - Austin, TexasThe biggest and most established global hub for everything crypto, blockchain and Web3.Register Now

Stress in the cryptocurrency market following the bankruptcy of crypto exchange FTX gives rise to a number of risks for Silvergate Capital (SI), Morgan Stanley said in a research report Monday.

Led by analyst Manan Gosalia, the team from the Wall Street bank downgraded its rating on Silvergate's shares to underweight from equal weight, but kept its price target at $24. The stock was lower by 3% to $25.69 in premarket trading, adding to a decline of more than 50% since the beginning of November.

Silvergate is faced with significant uncertainty about deposit flows in the near term, the analysts said, estimating that Silvergate's digital deposits are down 60% so far in the fourth quarter from the third quarter. As clients withdraw their deposits, the bank faces pressure on its net interest margins and net interest income because it needs to fund outflows with securities sales and more costly wholesale borrowing.

The demise of FTX could also drive litigation and headline risk across the crypto ecosystem, the note added.

Morgan Stanley’s 2023 earnings-per-share estimate for Silvergate is $1.58, far below the average estimate of $4.19.

Disclosure

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is an award-winning media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. In November 2023, CoinDesk was acquired by Bullish group, owner of Bullish, a regulated, institutional digital assets exchange. Bullish group is majority owned by Block.one; both groups have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary, and an editorial committee, chaired by a former editor-in-chief of The Wall Street Journal, is being formed to support journalistic integrity.

Author placeholder image

Will Canny is CoinDesk's finance reporter.


Learn more about Consensus 2024, CoinDesk's longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.