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Shares of SoFi Technologies Inc. surged in after-hours trading Tuesday after the financial-technology company said that it won regulatory approval to become a bank-holding company.
The company announced late Tuesday that it won approval from the Office of the Comptroller of the Currency and the Federal Reserve for its plans to become a national bank by acquiring Golden Pacific Bancorp Inc., a small community bank, and operating a bank subsidiary.
SoFi
SOFI,
expects the Golden Pacific Bancorp deal to close in February.
Shares of SoFi gained nearly 17% in after-hours trading Tuesday.
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SoFi sees multiple ways in which the banking charter will enhance its business. The company anticipates that it will be able to offer more competitive rates on its lending products and give members high-yield interest across checking and savings accounts, Chief Executive Anthony Noto said in a statement.
Mizuho analyst Dan Dolev predicted that SoFi’s banking progress would be well received on Wall Street, in part due to its potential earnings benefits.
“While having a bank charter license helps improve credibility and trust, it first and foremost should help lower SoFi’s cost of capital,” he wrote. Dolev estimates that SoFi could recognize $200 million to $300 million in incremental adjusted earnings before interest, taxes, depreciation, and amortization (Ebitda), largely by lowering its funding costs.
The company’s regulatory approval marks “a major step forward,” according to Dolev, since it will move SoFi “inside the federal bank regulatory framework, where it will be subject to comprehensive supervision and bank regulations — an advantage over competitors.”
The company first announced its plans to acquire Golden Pacific Bancorp last March. At the time, the company had been trying to obtain its bank charter through a “de novo” application process but determined that it was likely to reach its goal more quickly by acquiring an existing bank and pursuing a “change of control” application.
Shares of SoFi have declined about 38% over the past three months as the S&P 500
SPX,
has risen 2.4%.
