This week, we dig into Upstart’s earnings highlights, Stripe’s blockbuster valuation at $95 Bn, and the continued increase in deposits at US banks.
Let’s get to it.
If GDP Outlook is so Strong, Why isn’t the Fed Raising Rates?
Last week, jobless claims climbed to 770,000, still higher than the pre-pandemic peak of 695,000 but nearing November’s pandemic lows.
Although the Fed has raised US GDP growth outlook to 6.5% for 2021, the Fed kept interest rates unchanged and has continued its bond purchases program, buying at least $120 Bn worth of Treasury bonds and mortgage-backed securities each month.
The Fed views interest rate changes as a key signaling mechanism and, for now, is determined not to signal premature confidence.
Deposits at US Banks Continue to Build Up
PeerIQ continues to track the recent liquidity build at US Banks (see here). Americans’ deposits at FDIC insured financial institutions surged ~22% to $15.5 Tn in the year ended June 30, 2020, the largest single year growth in 77 years.
Source: FDIC, Bloomberg, PeerIQ
Upstart Earnings Highlights
UPST (Market cap $8.2 Bn, P/E ratio 746.05x, P/S ratio 35.8x)
After Upstart reported their first earnings since their IPO on Wednesday, February 17, 2021, the stock jumped up to a high of 94%.
One of the highlights was their announced acquisition of Prodigy Software, a leader in cloud-based auto commerce, which is expected to close in Q2 2021. We think this acquisition is a clever way for Upstart to accelerate into the BNPL sector and expand into a new asset class (auto) in a way that its competitors have struggled.
- Number of loans originated in Q4 2020 at 123.4 MM (up 57% YoY)
- Revenue in Q4 2020 at $86.7 MM, up 39% YoY (fees were 97% of revenue)
- 71% of loans instantly approved and fully automated
- $98 MM of loans on the balance sheet, down from $266 MM in Dec 2019, reflecting the reduction in loans funded directly through Upstart’s balance sheet
- Borrower acquisition costs at $32.2 MM in Q4 2020
- Total of 15 banks now on the platform
Source: Upstart, PeerIQ
LendingClub (LC), which reported their earnings last week, also had a strong run in the equity markets this week, with the stock now trading up 67% from its pre-earnings price. See our highlights for LC here.
Morgan Stanley to Offer Crypto Through NYDIG/Galaxy
Morgan Stanley will soon offer its wealth management clients access to bitcoin-related funds, including funds operated by NYDIG and Galaxy Digital. Morgan Stanley was one of the participants in NYDIG’s $200 MM growth capital round earlier this month.
Morgan Stanley outlined the case for cryptocurrency as an emerging investable asset class and suggested that qualified investors should look at publicly traded products as opposed to direct ownership of cryptocurrencies.
Stripe Scores Blockbuster Valuation at $95 Bn
Stripe, led by CEO Patrick Collison raised $600 MM in Series H funding, which skyrocketed Stripe’s valuation to $95 Bn, more than 2.5x its valuation from its last funding round in 2019. Stripe is now the second most valuable fintech behind Ant Financial.
The company will use the capital to invest in its European operations, support surging demand from enterprise clients across Europe, and expand its Global Payments and Treasury Network.
Many congrats to the team at Stripe!
Robinhood’s Competitor eToro to go Public
Multi asset investing and trading firm eToro, led by CEO Yoni Assia, has announced that it will go public via SPAC. The deal is valued at $10.4 Bn, and includes commitments for common share private placements of $650 MM from leading investors such as ION, SoftBank, Third Point, Fidelity, and Wellington.
The 14-year-old Israeli company has seen rapid growth since it launched in the US two years ago. Last year, eToro said it added over 5 MM new registered users and generated gross revenues of $605 MM, up 147% YoY. In January alone, the company added over 1.2 MM new registered users and executed more than 75 MM trades on its platform.
Chime Looking to go Public
Chime, led by CEO Chris Britt, has started preliminary talks with investment banks regarding its market debut, which could value the challenger bank at over $30 Bn by the end of 2021. Since launching in 2012, Chime has emerged as one of the fastest growing financial technology platforms in the US.
Valued at $14.5 Bn in a private fundraising round in September, Chime has raised over $1.5 Bn in capital, with more than $1 Bn of cash at its disposal.
In the News:
- Why Are Jobless Claims Still High? For Some, It’s the Multiple Layoffs. (NY Times, 3/18/2021) Unemployment claims climbed to 746,000 as the pandemic reached its one-year mark.
- Every Bank Needs a Chatbot (Or Two) for its Digital Transformation (Forbes, 3/15/2021) According to research from Cornerstone Advisors, by the end of 2020, the adoption of chatbots amongst mid-size banks and credit unions has more than tripled.
- LendingClub (Now a Bank) Aims to Become a ‘Financial Health’ Brand (Financial Brand, 3/14/2021) LendingClub is striving to become a “financial health brand” by offering Radius deposit products to its traditional marketplace borrowers.
- Afterpay Enters Southern European Market with Clearpay (FinExtra, 3/15/2021) Afterpay has expanded to France, Spain, and Italy with its new division Clearpay.
- US Banks will Turn Last Year’s Fear into this Year’s Profits (WSJ, 3/15/2021) Banks are expected to free up a lot of pandemic-era reserves and make the most of those funds in the coming months.
- Mastercard and Visa Postpone Planned US Interchange Hikes (PYMNTS, 3/16/2021) The fragile stage of the US economic recovery has encouraged Mastercard and Visa to delay their hikes in interchange fees until April 2022.
- How Wells Fargo and Current Keep Digital Banking Novices Engaged (Payments Source, 3/17/2021) Contactless payment options and providing the underbanked an easier way to access stimulus funds are some of the ways Wells Fargo and challenger bank Current keep their digital banking customers engaged.
- How US Bank Tripled its Digital Account Openings (Banking Dive, 3/17/2021) US Bank’s new streamlined banking platform has helped the bank triple its online checking account openings year-over-year.
- Stimulus Check Memes, Jokes Erupt as People Celebrate Direct Deposits in Accounts (News Week, 3/14/2021) Americans reacted to receiving their stimulus deposits with memes on Twitter.