Crypto Bank Silvergate Falls After Third Quarter Earnings Miss

Yueqi Yang and Max Reyes, Bloomberg News

(Bloomberg) -- Silvergate Capital Corp. shares slumped 23% after the cryptocurrency-focused bank’s third-quarter results missed consensus estimates and a much-anticipated stablecoin launch was delayed.

The bank reported earnings-per-share of $1.28 for the quarter, lower than the average analyst estimate of $1.41, according to data compiled by Bloomberg. It also said deployment of its stablecoin -- built with technology the bank acquired from the failed Meta Platforms Inc.-backed Diem project -- would be delayed to an unknown future date. A rollout had been expected by the end of this year.

Silvergate is working with regulators and policy makers to ensure compliance of the stablecoin, said Alan Lane, president and chief executive officer of Silvergate, during an earnings call. “We still feel very strongly that we are in the best position of any other bank out there to launch a regulatory compliant, safe and sound, tokenized dollar on the blockchain.”

Analysts at Wedbush including David Chiaverini cut their EPS estimate for the bank for the next three years, citing lower average earning asset growth assumptions and the delay of the stablecoin launch. Still, they said Silvergate is “well-positioned to thrive” when the crypto market rebounds and expect revenue to ramp up after the pilot launch of the stablecoin, which they now expect to occur in the third quarter of 2023.

The total cryptocurrency market valuation dropped by about $2 trillion in the last year as investors have, at least temporarily, lost interest in cryptocurrencies and other risky growth assets.

Silvergate Exchange Network, the firm’s key growth driver, reported a drop in usage in the quarter. The payments platform for crypto firms and investors handled $112.6 billion of US dollar transfers, down 41% from the prior quarter and 30% from a year ago.

Silvergate’s digital asset customers grew to 1,677 at Sept. 30, up from 1,585 at the end of last quarter. But average digital asset customer deposits fell to $12 billion, down from $13.8 billion from the prior quarter.

Shares of the company, which are down 63% so far this year, fell 23% to $54.71 on Tuesday in New York.

(Update shares move, analyst comment)