showed continued strength in the second quarter of 2022, with the financial services group positioning itself as a “crypto bank” reporting record profits despite a crash in digital assets.
Silvergate (ticker: SI) reported net income of $38.6 million in the June quarter, generating earnings per share of $1.13. Wall Street expected earnings of 84 cents per share for the quarter, according to estimates from analysts polled by
set of facts
Net income fell from $27.4 million in the previous quarter to $20.9 million a year ago.
Silvergate shares gained 20% on Tuesday.
While growth in its crypto customer base has slowed slightly, Silvergate has continued to add customers in this key segment, reaching 1,585 customers at the end of June, from 1,503 at the end of March. Digital currency customer commission revenue 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 environment facing the broader digital currency ecosystem,” Alan Lane, president and CEO of Silvergate, said in a statement.
As the crypto lending industry as a whole comes under severe pressure, Silvergate said its leveraged solutions, which provide institutional access to US dollar loans backed by
— saw no losses or liquidations. Leveraged commitments increased to $1.4 billion at the end of June from $1.1 billion at the end of the prior quarter.
The Silvergate Exchange Network, the bank’s in-house instant wire transfer network, processed $191.3 billion in U.S. dollar transfers in the three months to the end of June, up 34% from the previous quarter.
“Our platform was designed to support our clients in this relatively nascent industry during times of high volumes, volatility and market transformation, and performed as expected throughout the quarter,” Lane said. “Our balance sheet is optimized for client liquidity and risk management practices are at the forefront of all aspects of our business.”
Amid a dramatic rout that has hit digital asset markets, Silvergate’s average crypto client deposits fell to $13.8 billion in the second quarter from $14.7 billion in the first three months of 2022. Bitcoin has just completed 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 against nearly $3 trillion eight months ago.
The crypto crash did Silvergate shares a disservice. Even after the best day of stock market gains in nearly nine months, the group’s shares have fallen more than 47% this year.
But Wall Street remains bullish on Silvergate. Eight out of nine analysts polled by FactSet have a buy rating on the stock; an analyst rates it at Hold. The average target price for the stock among this group of analysts is $124.50, implying gains of 60% from current prices.
Write to Jack Denton at [email protected]