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Aug 18, 2023

How Bridgewater Bank managed the SVB crisis

Justin Horstman, director of IR at Bridgewater Bank, explains how the small-cap bank is dealing with the fallout from the Silicon Valley Bank crash

Silicon Valley Bank (SVB) crashed in March earlier this year, something that took not only the banking sector but also the public by surprise. The ripple effect from the bank’s collapse is still being felt today, especially as interest rates reach new peaks, but the effect is particularly strong in the small-cap banking sector.

Justin Horstman, director of investor relations at Bridgewater Bank, says the failure of SVB is still being dealt with months later, along with the higher interest rates sweeping across the US and globally.

The focus for most banks as a result of the SVB crisis has been around managing net-interest margin trends and funding sources for deposits. ‘As interest rates have increased, the cost of deposits and cost of funding has increased pretty substantially,’ Horstman explains.

These higher costs were accelerated by the SVB failure and also the collapse of First Republic Bank, which crashed around the same time.

Managing the fallout

The impact of the bank failures as well as concerns around credit quality have been some of the main conversation points for Horstman when speaking with investors. ‘I think investors and the media are trying to figure out what the next issue is going to be for banks,’ he says.

How Bridgewater Bank managed the SVB crisis
Justin Horstman, Bridgewater Bank

Discussing some of the points shareholders have raised over the past eight months, Horstman says that from a generalist investor standpoint, a lot of them have been on the sidelines and hold concerns regarding the banking sector.

‘Stocks are so low that valuations are low,’ he says. ‘I think a lot of markets are still taking meetings – we’re still chatting with a lot of them and they’re doing their due diligence and trying to get more insights on the stories. From what we’re hearing, however, they’re trying to find the right time to jump back into the banking sector because a lot of them are spooked.’

Creative ways to tell a story

Discussing some of the main IR focal points for the remainder of this year and into the next, Horstman says it mainly surrounds figuring out new, creative disclosures for telling the bank’s story. There have been a lot of new topics and metrics investors are focused on, he notes, including the level of uninsured deposits.

‘That was something no one ever cared about, really, before,’ he says. ‘So trying to figure out new ways to throw that into our slide deck as well as deposit flows will be things we look into.’

He adds that in general there is always a need to try to get in front of new investors. ‘I don’t think that’s anything new,’ he concedes. ‘But it’s something that’s getting magnified a little bit this year, as some investors have stepped to the side a little bit.’