IB Net Payout Yields Model

FinTech - Improved Regulatory Environment Is Bullish

Trump hasn't even taken office yet and the Federal regulators are already proposing regulations that will make it more efficient for FinTechs to operate. The Office of the Comptroller of the Currency proposed allowing FinTech firms to obtain a national bank charter.

Firms from LendingClub (LC) to OnDeck Capital (ONDK) to Square (SQ) and numerous private FinTechs could benefit from have more regulator certainty. The origination of loans by non-bank, tech firms has always operated in the gray area while a national bank charter could provide for more freedom not available in the current system requiring state-by-state permission. In a big surprise, the regulators offered far more than what was expected.

While the move would eliminate regulatory uncertainty for LendingClub, it wouldn't alter the funding uncertainty for the online lending platform that crushed the stock in May. The move though could open up new deposit sources for OnDeck Capital if the FDIC was to allow federally insured deposits that would reduce the cost of funding future small business loans.

Both stocks trade near the lows as the tech sector has struggled after the election of Trump, but this new regulatory environment could provide a boost to these online lending leaders. In fact, LendingClub already trades back near the lows prior to a blowout Q3 report.

The stock is an extreme steal back towards $5 where the EV sits at only $1.2 billion. An investor even has less risk now with the online lender in verified turnaround mode already.

More research:
Lending Club: Game Changer

OnDeck Capital: Worth The Risk

Disclosure: Long LC. Please review the disclaimer page for more details. 


Anonymous said…
In addition to the benefits you mention, this also has a significant and direct profitability impact. Lending Club currently pays WebBank margin on each loan to operate under that bank's national charter.

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