One of the best performing banks in the US last year Signature Bank has seen its share price (SBNY) plummet as the bear market takes hold, writes Financial Times.

Signature is the 30th largest bank in the US by assets, despite having only seven branches and no advertising at all. But the bank decided to bet on cryptocurrencies four years ago, and that bet proved to be the right one – until now.

Peak in market capitalisation at the beginning of the year

Now the bank is struggling with its rapid growth being reversed. SBNY was named the best stock in the KBW Bank Index last year after Signature Bank decided to accept stablecoin issuers, crypto exchanges and bitcoin miners as customers.

The bank also introduced Signet at the time. This is an internal blockchain-based payment system that allows bank customers to transfer money around the clock.

Now Signature’s market capitalisation has halved since peaking at $23 billion in January this year. It is also currently at the bottom of KBW Bank Index.

Deposits decline in the second quarter

The bank announced this month that deposits fell by US$5 billion in the second quarter of this year. Half of the losses came from digital assets, the other half from customers of the New York banking team.

According to Casey Haire, an analyst at Jefferies, this decline could lead to increasing investor concerns about funding future loan growth with the now depleted excess cash position.

Wrath of the regulators

Signature Bank’s rapid growth and support for the controversial crypto industry is said to have attracted the attention of regulators. A spokesperson for Signature told the Financial Times that the bank does not hold cryptocurrencies, only the US dollar deposits of its customers.

In addition, representatives of the bank said that Signature’s lending business is a very safe niche that belongs to private equity. The bank has achieved remarkable growth in this area over the last four years.

A zero-loss business?

The bank provides capital financing to investment funds that do not have sufficient liquid assets for investment. Its clients include sovereign wealth funds, foundations and pension funds. The bank described it as a zero-loss business.

According to Daniella Cohen, an analyst at Morgan Stanley, rising interest rates and increasing crypto volatility are a concern. She wrote in a note to clients:

We assume that rising interest rates will continue to weigh on deposits in the future. Customers are looking for more attractive yields. Deposit balances are expected to decrease by US$ 2.8 billion in the second half of this year.