Summary
- I discuss the implications of SOFI obtaining their banking charter as this allows SOFI to utilize deposits to fund loans, creating better margins.
- The banking charter could open up new revenue streams through its Galileo platform.
- SOFI raised guidance with the federal student loan moratorium still intact, it’s on track to be lifted in Q2 which will bring a large revenue stream back online.
- I think SOFI is going to become a missed opportunity for many investors and I will not be one of them.
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As of payday now loans Danforth IL 1/, million shares of SoFi Technologies (SOFI) are sold short, which correlates to 16.9% of the float being shorted. Shares of SOFI seem to have found a bottom, and I am wondering why short-sellers are not exiting this position? SOFI has built a one-stop consumer financial services company experiencing considerable internal and external growth through its Galileo platform. The signs indicate SOFI’s vertically integrated platform will generate increased future revenue and EBITDA trends. Unlike traditional banks, SOFI has built an integrated app delivering an ecosystem with one of the broadest product sets of financial products in the neobank space.
SOFI is set to report earnings on 3/1/22, conveniently 2 weeks after the Superbowl held at SOFI Stadium. I am shocked that shares of SOFI have dropped to the $ range, especially after the recently approved bank charter. While traditional finance has changed substantially, traditional banking hasn’t been disrupted as the big banks still operate in the same way. I think that’s going to change, and future banking clients will be drawn to a complete virtual banking system that is operated in the cloud. SOFI is the bank of tomorrow, and it’s going to be difficult for the traditional banks to compete with SOFI as their overhead and expenses are drastically reduced due to a non-existent physical footprint. Shares of SOFI plunged after the IPO, experienced temporary euphoria after Q3 earnings, reaching the low $ 20’s, only to crash below the levels where Anthony Noto (SOFI CEO) purchased shares back in August in the low $ 14’s. Yes, shares of SOFI have declined in price, but I wouldn’t want to hold shares short going into earnings, especially since SOFI now holds their banking charter.
SOFI is now officially a bank providing it flexibility and legitimacy
The night of 1/ will be a night that Anthony Noto never forgets as he received confirmation that SOFI received approvals from the Office of the Comptroller of the Currency (OCC) and the Federal Reserve to become a bank holding company and acquire Golden Pacific Bankcorp. The bank charter approval is a critical component of SOFI’s strategic plan, providing financial and non-financial benefits. Mr. Noto has discussed the importance of this milestone in his interviews, and I believe 2022 is the year the investment community sees the transformation come full circle.
Obtaining the bank charter will position SOFI to lower its cost of capital, increase the holding period of loans, and drive growth through its lending programs. Previously SOFI didn’t have the ability to fund its borrower loans through its customer deposits resulting in them paying a higher cost on the capital utilized in loans. Funding loans through deposits are more stable than warehouse lines of credit and securitization funding which can be difficult to obtain in periods of economic uncertainty and is reliant on market participation. Having a stable source of funding will allow SOFI to hold loans for a longer period. SOFI’s dependence on warehouse lines will decrease, which should correlate to increased net interest margins and drive higher incremental EBITDA. As SOFI’s margins increase, it allows the flexibility to become more aggressive and lower borrower lending rates to drive faster loan growth and innovate a lending-as-a-service platform it can cross-sell to Galileo clients.