SoFi stock soars 20% on approval to become a bank
The fintech company got approval from its two major regulators to obtain a national bank charter, which could keep the stock riding high.
Shares of online personal finance company SoFi soared 20% in after-hours trading Tuesday on news that the company received regulatory approval to become a national bank.
The San Francisco-based fintech company announced Tuesday that it received approval from the Office of the Comptroller of the Currency (OCC) and the Federal Reserve to become a bank holding company.
That could drive a big gain for investors in the stock.
Not yet a bank
Though SoFi offers banking products that include loans, cash accounts, credit cards and investments, it’s not a bank.
For instance, SoFi’s cash account, SoFi Money, isn’t a checking or savings account. Instead, it’s a brokerage product offered by SoFi Securities LLC. The debit card that comes with the account is issued by The Bancorp Bank, an FDIC-insured bank based in Delaware. Like many fintech companies, these partnerships allow them to offer banking products and services without actually having to be a bank.
To become a bank, SoFi is acquiring California community bank Golden Pacific Bancorp and will operate its bank subsidiary as SoFi Bank. SoFi said it will maintain Golden Pacific’s community bank business and footprint, including its three physical branches.
The deal was announced in March of last year and is expected to close in February 2022.
“This incredible milestone elevates our ability to help even more people get their money right and realize their ambitions,” said SoFi CEO Anthony Noto. “With a national bank charter, not only will we be able to lend at even more competitive interest rates and provide our members with high-yielding interest in checking and savings, it will also enhance our financial products and services to ensure they efficiently meet the needs of our members, business partners, and communities across the country, while continuing to uphold a high bar of regulatory standards and compliance.”
“This important step allows us to add to our broad suite of financial products and services to better be there for our members during the major financial moments in their lives and all of the moments in between,” Noto added.
Morgan Stanley sees stock gains
SoFi went public last year after merging with the blank-check company Social Capital Hedosophia Holdings Corp. V, run by venture capital investor Chamath Palihapitiya.
The stock has been under pressure since November 2021, despite posting better-than-expected quarterly results. Investors have been moving out of high-tech growth stocks as the Fed gears up to start lifting interest rates this year.
But Morgan Stanley analysts said Wednesday that SoFi’s move to launch a bank could drive a significant upside for its stock. The investment bank sees a price target of at least $20 moving forward, reflecting a 46% upside from its Wednesday’s price.
A solid five of seven analysts covering SoFi shares have called it a Strong Buy or Buy, versus only two Holds and no Sells of any kind. The average price target is $22.
Shares of SoFi closed Wednesday at $13.71, up 13.68% for the day.
At the time of publication, Matt Miczulski did not own shares of any equity mentioned in this story.
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