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Investment analyst downgrades Bermuda’s fintech bank

Jefferies analyst Ken Usdin has cut Signature Bank from “buy” to “hold“

A New York bank endorsed by the Bermudian Government to provide US banking services to Bermuda-licensed fintech companies was downgraded last week by an investment analyst to “hold” from “buy”.

The investment firm Jefferies slashed its price target for the bank stock to $124 from $185.

Shares were down marginally to $118 in mid-day action Monday.

The cut to "hold" by the formerly bullish analyst comes after the stock suffered a 67 per cent year-over-year decline.

Also, CoinDesk quoted a report from Ken Usdin, an analyst at Jefferies, saying Signature Bank’s management’s decision to shrink its digital asset deposits business is understandable given the recent turmoil in the cryptocurrency industry.

But the analyst’s report said that shrinking crypto deposits, reportedly by as much as $10 billion and replacing them with wholesale borrowings costing about 4.25 per cent would have a negative impact on net interest margin and net interest income that was being underappreciated.

Signature Bank, a New York-based full-service commercial bank, agreed to provide a full range of banking services to companies that meet the standards of Bermuda and the bank, a government statement said four years ago.

Signature was held out as the answer to Bermuda’s fintech banking problem.

David Burt, the Premier, said at the time that Bermuda had 66 fintech companies incorporated on the island, but the absence of banking services for fintech companies was a problem.

Mr Burt said: “Banking for the fintech sector has been a considerable challenge around the globe. Banks have been reluctant to take on the risks of dealing with digital assets for fear that they may fall foul of global compliance regulations.

“Signature Bank’s willingness to consider Bermuda-licensed businesses for banking services is a significant vote of confidence in, and endorsement of, Bermuda’s efforts to create a leading high standard regulatory regime for fintech business.”

“Bermuda is setting itself apart by providing regulatory certainty combined with a world-renowned reputation for transparency and the highest standards of global compliance.

“Signature Bank’s endorsement showcases how Bermuda is competitively placed to advance the pace of the digitisation of global commerce as modern technology is applied to the highly regulated world of finance.”

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Published January 17, 2023 at 7:44 am (Updated January 17, 2023 at 7:44 am)

Investment analyst downgrades Bermuda’s fintech bank

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