SBNYP - No Sympathy For Silvergate
Summary
- Several other banks have traded down in sympathy.
- Here is a bank shot on the Silvergate carnage.
- Invest based on data, not analogy.
My Cowardly Play on Silvergate
A number of banks have traded down in sympathy with Silvergate ( SI ), a bank that has gotten badly hurt from crypto fallout. It is hard to get comfortable with Silvergate's deposit stability on the long side. Short interest is high enough to risk squeezes, so I'm not comfortable on the short side either. So far just rubbernecking.
Silvergate is down over 85% over the past three months. Whether that is an over- or under- reaction, they indisputably have a giant concentration in crypto exposure. But the market has been sloppy at assigning guilt by association. Metropolitan ( MCB ) is down 16% in part because they're perceived to be a crypto bank. Yet they exited that business a year and a half ago. Losing 100% of crypto deposits would be immaterial. Signature ( SBNY ) has some exposure but it is well-contained. Provident ( PVBC ) was cut in half in three months yet if their cryptocurrency loan exposure is written off (somewhat overly conservative), their tangible book value is still $8. They fired their CEO and this mutual to stock conversion that is now past its 3-year anniversary could be an M&A target within the next few years.
Conclusion
If you're looking for a few bank stocks on the clearance rack, then Silvergate's carnage might have given you an opportunity. These could be good entries, but aren't intended for some sort of quickie trade; hang onto them for at least a year before checking back. If it is your unleveraged capital and you have no external audience demanding explanations for each basis point move hour-to-hour, you'll probably be happy to own them.
And always question analogies, especially any stated as if they're dispositive. Most companies and their securities are one-off situations requiring one understands that specific circumstance. Specifically, PVBC is an opportunity anywhere under $10 per share worth buying today with many ways to win in the years ahead.
| My Note on PVBC: Provident ( PVBC ) was cut in half in three months yet if their cryptocurrency loan exposure is written off (somewhat overly conservative), their tangible book value is still $8. With some crypto value, we can get to $10. Worth $12 to a buyer. They fired their CEO and this mutual to stock conversion that is now past its 3-year anniversary could be an M&A target within the next few years. - Wed, Jan. 11 11:14 AM Sifting the World Price Alert |
TL; DR
Buy MCB , SBNY , and PVBC on their crypto-driven pullback.
For further details see:
No Sympathy For Silvergate