Former executive at Signature Bridge Bank NA
- Signature Bank’s (NASDAQ: SBNY) operating environment and bank run drivers, plus contagion potential
- Impacts of niche industry deposit exposure on the reputation of a bank
- Bank dissection expectations, evaluation of potential acquirers and reopening outlook
- Regulatory reactions, including projections for interest rate movement
From the perspective of a former employer, can you guide us through the events that led to Signature Bank’s closure over the last few days? Was any of it expected and who do you think is to blame here?
Do you think the closure of Signature was warranted? Do you agree with the regulator’s decision?
We know a large portion of SVB’s [Silicon Valley Bank’s] deposit base did carry a higher beta that should have been better mitigated on the balance sheet, so one can argue the company suffered from a mismanagement of its assets. Could the same be said for Signature?
A large portion of Signature’s portfolio was targeted towards real estate. The bank isn’t alone with that, considering hundreds of regional banks have developed this somewhat niche focus on commercial real estate lending. It’s reported that Signature had tapped on the Federal Home Loan Banks for money on Friday 10 March 2023 and was told there wasn’t enough to go around due to the number of requests. Who might you expect those requests to be coming from and where could the contagion go?
The whole saga and what happened to Signature is obviously different from what happened to Silvergate and SVB. How does this speak to the importance of a bank’s branding? It does seem that element of crypto, although minute, cost all senior management their jobs.
How do you expect other regional banks to move forward with their brand identities, given how Signature’s identity as being open to crypto seems to have brought it down? Do you expect some whitewashing of regional banks’ brands moving forward?
Do you think the players absorbing deposit outflows will be the big four or the too-big-to-manage banks, or would it be larger regionals, such as PNC, Truist and US Bank?
Could the Signature crisis spell the end for smaller-scale banks taking a big risk on an emergent market segment? Might this spell the end for smaller-scale banking, period, given the heightened element of customers wanting to make sure their funds are safe?
Post-GFC [Global Financial Crisis], the number of commercial banks in the US dropped by 2,800. Noting that you’re maintaining there will be a role for middle-market banking moving forward, would you agree that we can at least expect more consolidation? To what extent do you think the current saga will reduce the number of banks in the system? How many victims will there be, essentially?
I want to try and put on the hat of a middle-market bank. What types of internal changes do you think these banks are looking to make, effective immediately? As this is a liquidity crisis, what other options do banks have for liquidity, besides parking their deposits in treasuries, in the short or long term?
A lot of the fleet of deposits, whether from stable companies or not, are being reverted to neobanks, so fintechs that bank commercially. Could you help make sense of that shift?
How could the lending environment change post recent developments? Can we expect a higher cost of capital?
What impact will the current crisis have on the commercial real estate space, given Signature and many other banks’ exposure to the segment? What steps do you think other banks with significant commercial real estate exposure are taking today?
What do we make of outstanding loans? Do you expect those to be under consideration in any current buy-out discussions right now? We’re trying to imagine what happens next.
What might be going on behind the scenes at Signature? Do you have any thoughts on how the sale or dissection of the bank might unfold?
What are some potential puts and takes behind a hypothetical PE player possibly making a move on Signature? How might this be advantageous, based on a PE firm’s function and nature?
Why might you expect to see a move on Signature from a big four bank?
What happens if we don’t see a buyer for Signature?
Does the regional bank crisis spell the end for rate increases? What could the rate trajectory look like now after this?
Focusing on the recent decision-making of regulators, did we just nationalise the entire US banking system? If every uninsured deposit at the failed institutions in question is guaranteed by the federal government, what stops every bank manager from playing a riskier strategy in support of shareholder returns, as a part of the other side of the coin, rather than seeing an immense conservative approach?
What are your thoughts on any potential amendments to the USD 250,000 threshold for FDIC [Federal Deposit Insurance Corp] insurance for corporate accounts? Businesses often hold deposits in the millions, not in the couple of hundred thousand range.
Strangely, we saw a rebound in regional bank stocks on 14 March 2022. What’s your tangible outlook for contagion? Who else might you expect to suffer a similar fate? Who are you watching closely?
What are you keeping in mind to determine portfolio risk across the regional bank landscape? What metrics are you looking at as an analyst when you see, for example, Truist vs Zions, in trying to determine which name is riskier than the other based on X, Y or Z factors?
How might Signature differ from SVB in outlook? Do you think there’s a substantial potential for recuperation and for the bank to relaunch under a different name? What’s your outlook there?
Is there a possibility that Signature could provide a sense of calm or assurance to its fled depositors and entice them back? Do you think bank loyalty can work in Signature’s favour in coming out of this differently than SVB or Silvergate, who had quite fleeting depositors? On the one hand, people were really only banking with Silvergate because of the exchange network, and with SVB, the VCs themselves were prompting depositors to pull their deposits, but this is all different for Signature. The bank seems to have had long-standing relationships with its depositors. If it can prove in the investigations occurring in the next couple of days that its financial performance was healthy and stable, could that play into a potential turnaround?
Are there any final comments you want to leave us with? Is there anywhere you may hold a contrarian view on the recent developments on Signature and whether the company can resurface?
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