California-based crypto bank Silvergate chooses to temporarily suspend the payment of its dividends. The bank does this to keep its currently still liquid balance sheet healthy. In a announcement on January 27 the listed bank stated that this is necessary to keep sufficient capital on board.
Prepare for the storm
Silvergate says it made the decision primarily so it can survive the storm of the crypto winter. After the increases of the past few weeks, this seems to be over, but of course you never know what can happen in the coming period. The “bank of the crypto industry” says the company’s cash position still exceeds its customers’ assets.
“This decision reflects the company’s focus on maintaining an extremely liquid balance sheet with strong capital positions while managing recent volatility in the digital asset industry,” Silvergate said. From now on, the bank evaluates on a quarterly basis whether it can pay the fixed dividends of 5.375 percent.
Loss of 1 billion dollars
Silvergate’s announcement comes just 10 days after it posted a $1 billion loss for the fourth quarter of 2022, which was reported on January 17. The company blames the dramatic fourth-quarter performance on abysmal market sentiment, which is forcing investors to take more and more risk off the table.
In its quarterly report overseeing Q4 2022, Silvertgate CEO Alan Lane writes that the company is still bullish on the crypto sector, but wants to operate with a strong balance sheet. That in itself is a good idea for companies in this industry, because winters are often long and harsh.