SoFi is ‘not just another neobank,’ Bank of America analyst says

SoFi shares were near flat in Friday afternoon trading after rising as much as 6.9% earlier in the session.

In Bhatia’s view, SoFi’s broad portfolio, which includes deposit accounts, investment accounts, and lending products, is a major strength.

“Customers are exposed to the entire SOFI product ecosystem through an integrated app offering that drives cross-sell and boosts already attractive unit economics,” he explained. “We believe the strategy is still in the early innings and as SOFI attracts more users to its superior technology and robust product set it will deliver attractive revenue and earnings growth.”

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The company recently obtained approval for a bank charter, which could deliver various benefits by allowing SoFi to fund loans with deposits and lower its cost of funds. Additionally, if the company reduces its rates for borrowers because of its own lower cost of funds, the move could help increase loan originations, Bhatia said.

While he anticipates that SoFi will be “deliberate” in how it using the bank charter early on, he also wrote that consensus estimates currently may not bake in many benefits from the charter.

“We think 2022 benefits will build through the year,” he wrote, noting that SoFi could provide more clarity on how the charter may impact near-term results when it reports fourth-quarter earnings. That report is scheduled for March 1.

Bhatia also likes the company’s Galileo business, which is a payment-processing and technology platform. While SoFi uses Galileo itself, various neobanks are also customers of the platform. As such, Galileo offers a “competitive hedge” for SoFi as it allows the company to benefit from growth in the broader neobanking industry, said Bhatia, who called Galileo “a key differentiator.”

SoFi shares have declined 46% over the past three months, as the S&P 500
SPX,
-1.90%
has dropped 4.9%.