Shares in Sofi Technologies (SOFI) surged on Wednesday after federal regulators approved its application for a charter banking license. Analysts expect SoFi shares to rise on the back of consumer loans and deposit accounts.
The Federal Reserve’s Office of the Comptroller of the Currency on Tuesday approved SoFi’s purchase of Golden Pacific Bancorp, but SoFi’s bank will not be able to offer cryptocurrency-related services. San Francisco-based SoFi currently offers home loans, personal loans, school loans, and credit card services.
“While having a bank charter license helps improve credibility and trust, it should primarily help lower SoFi’s cost of capital,” Mizuho Securities analyst Dan Dolev said in a note. to customers. He added, “We estimate earnings could be $200-300 million of additional adjusted EBITDA, primarily due to lower funding costs.”
SoFi stock jumped 17% to 14.14 in trading today.
With Wednesday’s gain, SoFi stock is still down about 8% in 2022. Additionally, shares are down 36% from a year ago.
Stock SoFi: banking license to increase revenue
Morgan Stanley analyst Betsy Graseck said in her note to clients that the supervisor’s approval requires Sofi to provide the bank with $750 million in capital.
“Once operational, we estimate the bank can generate approximately $200 million or more of 10% revenue through a combination of holding loans longer before they are sold as well as lower cost of funds, two increasing SoFi’s net interest income,” says Graseck.
SoFi acquired fintech platform Galileo Technologies in 2020. It provides card issuer processing services for select neobanks, including Chime.
Meanwhile, SoFi stock holds a relative strength rating of 15 out of the best possible 99.
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