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Metropolitan Commercial Bank braces for loss of crypto-client deposits


As it happened, around this time Metropolitan was marketing itself to a new set of customers. Specifically, the Midtown lender with $6 billion in assets became one of the few federally insured institutions to serve cryptocurrency enthusiasts. It offered a safe space to park dollars before converting them into Bitcoin or another currency and at one point nearly 20% of all deposits came from crypto clients.

Today, the bank is grappling with the fallout of that decision.

In July, $350 million deposits vanished with the bankruptcy of Gramercy-based crypto exchange Voyager Digital. Most of the rest of the $762 million in remaining deposits from the crypto community is expected to vaporize before the year is over, according to a report last week from Keefe Bruyette & Woods.

Metropolitan said in a statement that it has been reducing its involvement in crypto “in recent years” and doesn’t use deposits from the sector to fund loans or securities purchases. Additionally, it doesn’t expect a “material impact” to earnings should deposits decline.

“We do not have and have never had crypto deposits,” a Metropolitan spokesman said. “We hold dollar deposits for crypto customers.”

In an October conference call, CEO Mark DeFazio said the bank is now “just a bit more careful in certain decisions we make regarding certain asset classes.”

If all remaining crypto deposits disappeared, KBW said, 2023 earnings could fall by 21% but total loans and capital levels should continue to grow. Metropolitan is “well positioned to withstand volatility,” analyst Chris O’Connell concluded in a report last week.

Metropolitan is one of a handful of small lenders to dabble with the crypto world. Midtown-based Signature Bank drew in nearly 30% of deposits from crypto customers. California-based bank Silvergate drank deepest from the well and now has received a letter from three U.S. senators asking to explain how it helped move money around for FTX, the failed crypto exchange.

Metropolitan carved out a niche as a lender to nursing homes before welcoming Voyager and other such depositors. Last year its hitherto-sleepy stock nearly tripled in value but this year it has fallen nearly in half, or twice the average of its peer group.

Understandably, the bank is keen to chart a new strategic direction after taking a walk on finance’s wild side.

“We expect the digital currency business will continue to be de-emphasized over time,” O’Connell said.



Read More: Metropolitan Commercial Bank braces for loss of crypto-client deposits

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