On Wednesday, Raymond (NS:RYMD) James initiated coverage on FinWise Bancorp (NASDAQ:FINW), assigning the stock an Outperform rating and setting a price target of $21.00. The financial institution, headquartered in Murray, Utah, currently manages assets totaling approximately $683 million and has been recognized for its rapid growth.
According to InvestingPro data, the company's stock has shown remarkable momentum with an 87% surge over the past six months and a market capitalization of $251 million. Current analysis suggests the stock is trading above its Fair Value. This trajectory is expected to be sustained as it introduces new banking as a service (BaaS) offerings, expanding beyond its existing lending services.
The analyst from Raymond James noted that FinWise is poised to roll out a suite of BaaS capabilities, which include payment processing, a card offering, and a credit-enhanced balance sheet program. These services are aimed at making the bank a more compelling partner for advanced fintech firms.
While these forthcoming revenue streams are not yet factored into their financial model due to the current lack of detailed information and the broad range of potential outcomes, they are slated for a broad launch in 2025. InvestingPro analysis shows the company maintains profitability with a P/E ratio of 16.8 and has delivered a solid 32.8% return year-to-date.
The analyst highlighted that these scalable BaaS programs are expected to diversify FinWise's revenue sources by adding more fee income, reduce the risk profile of its balance sheet, and strengthen its deposit base by attracting no-cost and low-cost deposits over time. Furthermore, as FinWise expands its BaaS offerings and continues to forge partnerships with new fintech companies, its profitability metrics are projected to improve, building on its already favorable positioning above its peers.
In summary, Raymond James views the risk-reward profile of FinWise Bancorp positively. The firm anticipates that the bank's multiple will expand as it continues to demonstrate the effectiveness of its business model throughout the economic cycle.
In other recent news, FinWise Bancorp has reported a significant increase in loan originations during its Q3 2024 earnings call, reaching $1.4 billion, a substantial rise from the previous five-quarter average of $1.1 billion. The company also announced the launch of three new lending programs. The net income for the quarter was reported at $3.5 million, or $0.25 per diluted share, and the tangible book value per share rose to $12.90.
Financial services firm Stephens upgraded the stock price target for FinWise Bancorp shares to $18 from the prior target of $17, maintaining an Overweight rating based on strong Q3 results. Stephens remains optimistic about FinWise Bancorp's future, citing the addition of new partners and the company's strategic focus on Bank Identification Number sponsorship and payment services.
Despite an anticipated seasonal decline in Q4 originations, the company expects continued growth, supported by new programs and strategic partnerships. Non-performing loans increased to $30.6 million, with $17.8 million federally guaranteed. The company's net interest margin was 9.7%, with expected declines following Federal Reserve rate cuts. These recent developments follow FinWise Bancorp's plans to complete a payments hub by the end of 2023, with revenue generation expected to ramp up in 2025.
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