I have read this article a couple of times. Interesting. Some partial random observations that come at first glance:
- First of all, SOFI is basically a bank (yes, I am in that camp). A quick glance at its verticals tells me that Financial Services is where the growth is. YoY% is impressive, and it has the potential to keep growing if the economy cooperates.
- On Financial Services, fundamentals might be conducive to future growth if the economy remains in solid footing. Risks / vulnerabilities would be the same as any other consumer bank provider. In addition, the NPV of a credit card is way more attractive than that of a personal loan or student loan. SOFI also has an attractive brand name that can be leveraged to grow this division. On this topic, I would like to see that the company relies less on securitizations or loan selling, and focuses more on owning the entire revenue / risk stream. Capital One did this in the mid 2000s to great success when it moved from a monoline credit card company to a bank.
- Personal Services and Student Loans might also benefit from a solid economy / labor market, and a gradual reduction in interest rates (I agree that fast moves up or down are not healthy).
- For SOFI to be considered more than a bank in a proper way, Galileo has to grow faster. Current contribution and projected growth rates are just not enough in my opinion. Maybe if Galileo gets spinned off and operates as an independent company, value could be potentially unlocked, as . Several cases of companies where value gets created by spinning off divisions (e.g. Novartis / Sandoz as one that I personally benefited last year). And on this topic, banks in general have provided great returns to its shareholders in spite of the mini crisis in early 2023.
- In terms of risks, I would actually think that the economy and labor market trends are the biggest risk / opportunity, as is the case for other banks with strong consumer focus. I would expect SOFI's leadership to keep executing on its vision. That is a risk that they should be able to control. But how the economy performs could make the strategy to either be accelerated or scaled back.
Interesting article.I do not have to agree with every single point, but it is well done.
Keep it up.
Best - jh
Disclosure: No position. Current view of this company is neutral. I might trade it from time to time in both directions (recently with a long bias).
I have read this article a couple of times. Interesting. Some partial random observations that come at first glance:
- First of all, SOFI is basically a bank (yes, I am in that camp). A quick glance at its verticals tells me that Financial Services is where the growth is. YoY% is impressive, and it has the potential to keep growing if the economy cooperates.
- On Financial Services, fundamentals might be conducive to future growth if the economy remains in solid footing. Risks / vulnerabilities would be the same as any other consumer bank provider. In addition, the NPV of a credit card is way more attractive than that of a personal loan or student loan. SOFI also has an attractive brand name that can be leveraged to grow this division. On this topic, I would like to see that the company relies less on securitizations or loan selling, and focuses more on owning the entire revenue / risk stream. Capital One did this in the mid 2000s to great success when it moved from a monoline credit card company to a bank.
- Personal Services and Student Loans might also benefit from a solid economy / labor market, and a gradual reduction in interest rates (I agree that fast moves up or down are not healthy).
- For SOFI to be considered more than a bank in a proper way, Galileo has to grow faster. Current contribution and projected growth rates are just not enough in my opinion. Maybe if Galileo gets spinned off and operates as an independent company, value could be potentially unlocked, as . Several cases of companies where value gets created by spinning off divisions (e.g. Novartis / Sandoz as one that I personally benefited last year). And on this topic, banks in general have provided great returns to its shareholders in spite of the mini crisis in early 2023.
- In terms of risks, I would actually think that the economy and labor market trends are the biggest risk / opportunity, as is the case for other banks with strong consumer focus. I would expect SOFI's leadership to keep executing on its vision. That is a risk that they should be able to control. But how the economy performs could make the strategy to either be accelerated or scaled back.
Interesting article.I do not have to agree with every single point, but it is well done.
Keep it up.
Best - jh
Disclosure: No position. Current view of this company is neutral. I might trade it from time to time in both directions (recently with a long bias).
Thanks Chris, much appreciated
I like the new perks. Thanks