Shares of SoFi Technologies Inc. surged in after-hours trading on Tuesday after the fintech company said it had received regulatory approval to become a bank holding company.
The company announced Tuesday evening that it had obtained approval from the Office of the Comptroller of the Currency and the Federal Reserve for its plan to become a national bank by acquiring Golden Pacific Bancorp Inc., a small community bank, and operating a banking subsidiary. .
expects Golden Pacific Bancorp’s deal to close in February.
SoFi shares gained nearly 17% in after-hours trading on Tuesday.
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SoFi sees several ways the bank charter will improve its business. The company expects it will be able to offer more competitive rates on its loan products and give its members high-yielding interest on checking and savings accounts, chief executive Anthony Noto said in a statement. communicated.
Mizuho analyst Dan Dolev predicted that SoFi’s banking progress would be well received on Wall Street, in part because of its potential earnings.
“While having a bank charter license helps improve credibility and trust, it should primarily help reduce SoFi’s cost of capital,” he wrote. Dolev estimates that SoFi could recognize between $200 million and $300 million in additional adjusted earnings before interest, taxes, depreciation and amortization (Ebitda), largely by reducing its funding costs.
The company’s regulatory approval marks “a big step forward,” according to Dolev, as it will move SoFi “inside the federal banking regulatory framework, where it will be subject to full oversight and banking regulation – an advantage over its competitors.
The company first announced its intention to acquire Golden Pacific Bancorp last March. At the time, the company attempted to obtain its banking charter through a “de novo” application process, but determined that it was likely to achieve its goal more quickly by acquiring an existing bank and pursuing a “change of control” request.
SoFi shares are down around 38% in the past three months as the S&P 500 SPX,
increased by 2.4%.