Could a Bank Charter Actually Limit SoFi's Valuation?
After years of pursuit, SoFi Technologies (NASDAQ: SOFI) finally has a bank charter. The all-in-one financial services company's move into banking became official recently when it won regulatory approval and then completed its acquisition of Golden Pacific Bancorp.
There's a lot to like about SoFi's new look -- but investors may want to consider how becoming a bank impacts the company's valuation, since the market traditionally expects very different things out of banks and tech companies, and the bank-fintech combo is still a bit new for the market. Let's take a look.
There's obviously a reason SoFi chose to become a bank. First, the bank charter allows SoFi to bring all the deposits it has been gathering through its SoFi Money cash management account into the company because non-licensed banks can't hold deposits insured by the Federal Deposit Insurance Corporation (FDIC). Then, SoFi can use these deposits to fund a portion of its loan originations, which will save it money because SoFi has been relying on higher-cost funding sources.
Source Fool.com
