Crypto-Bank Silvergate Capital Gets Buy Rating From Wells Fargo (NYSE:SI)

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Wells Fargo analyst Jared Shaw has started covering cryptocurrency lender Silvergate Capital (NYSE:IF) with an overweight rating based on rising interest rates, as well as prospects for further growth in its exchange network.

Shaw’s bullish appeal comes despite the onset of crypto winter, exacerbated by crypto lending platform Celsius’ pause on all withdrawals due to “extreme market conditions”. More recently, crypto exchange Binance said it halted bitcoin (BTC-USD) withdrawals “due to a stalled transaction causing a backlog.” Silvergate Shares (SI) -17% alongside a series of crypto-focused stocks crater in Monday’s premarket trading.

Nevertheless, “as rates rise, higher spread income will come from a zero-cost deposit base, and further growth in SEN leverage and the deployment of a stable payments network issued by SI represent future opportunities,” Shaw wrote in a note.

The analyst pointed to growth in Silvergate’s (SI) digital customer base, its “biggest deposit driver,” with its customer base expanding at an annual rate of around 35-40% since 2019, according to the note. This “should generate a large portion of the bank’s short-term profitability, as 77% of assets are securities (55% free float) and the loan book is also heavily floating rate,” Shaw added.

Meanwhile, SA’s quantitative rating sees Silvergate (SI) as a Hold, with the lowest ratings in terms of momentum and valuation. In comparison, the average Wall Street analyst considers the stock a strong buy (6 strong buy, 3 buy, 1 hold).

Last week (June 9), Silvergate was awarded an Equalweight rating by Morgan Stanley.