First Republic Bank is sold to JPMorgan

Fintech Headlines for May 1, 2023: First Republic Bank is sold to JPMorgan, SoFi reiterates GAAP profitability target, Global Payments announces CEO change

Hi!

Welcome to the “Popular Fintech” newsletter! That was a busy Monday, I should say! Here’s what happened:

• First Republic Bank was seized by the Federal Deposit Insurance Corporation and immediately sold to JPMorgan

• SoFi reported its first quarter 2023 results and reiterated the target of reaching GAAP profitability by the end of the year

• Global Payments raised full-year 2023 revenue guidance and announced CEO's departure

First Republic Bank is Sold to JPMorgan

First Republic Bank was seized by the Federal Deposit Insurance Corporation and immediately sold to JPMorgan. The regulators worked through the weekend to find a new home for the troubled lender. As a result of the transaction, JPMorgan got the majority of First Republic Bank’s assets, including $173 billion of loans and $30 billion of securities, and assumed $92 billion of deposits (of which $30 billion came from the large U.S. banks that tried to rescue First Republic in March). JPMorgan assumed all deposits, including insured and uninsured, but did not take over First Republic’s corporate debt or preferred stock.

FDIC provided a five-year, fixed-term $50 billion financing, as well as agreed to share potential losses from the portfolio of Federal Republic’s single-family residential mortgage loans and commercial loans. The transaction is expected to generate $500 million in incremental annual net income for JPMorgan. First Republic reported $173.3 billion in loans and $104.5 billion in deposits on its earnings call last Monday, which suggests that deposit outflow continued in April despite management’s assurances that “deposit activity began to stabilize.” Shares of JPMorgan finished up 2.13% for the day. I hope this puts the turmoil in the regional banking sector to bed.

✔️ First Republic Bank Is Seized, Sold to JPMorgan in Second-Largest U.S. Bank Failure
✔️ JPMorgan Ends First Republic’s Turmoil After FDIC Seizure
✔️ JPMorgan Chase acquires substantial majority of assets and assumes certain liabilities of First Republic Bank
✔️ Jamie Dimon says ‘this part of the crisis is over’ after JPMorgan Chase buys First Republic

SoFi Reiterates GAAP Profitability Target

SoFi (NASDAQ: SQ) reported its first quarter 2023 results yesterday, (as usual) slightly beating its own guidance. The company onboarded 433,000 new members during the quarter, bringing the total to 5.7 million members. Total net revenue increased 43% YoY and 3% MoM to $472.2 million, driven by the 149% YoY and 13% MoM growth in Net interest income. The company reported a Net loss of $34.4 million and an Adjusted EBITDA of $75.7 million, an improvement from a Net loss of $110.4 million and an Adjusted EBITDA of $8.7 million a year ago. The company originated $3.6 billion in loans and finished the quarter with $16.2 billion in loans and $10.1 billion in deposits.

The company’s management reiterated its commitment to reach GAAP profitability by the end of the year and even modestly raised the full-year 2023 guidance. Thus, the company now expects to generate $1.96 to $2.02 billion in adjusted revenue, and $268 to 288 million in Adjusted EBITDA. Nevertheless, the company’s stock price declined 12.2% following the earnings report. It seems that investors are cautious about the company scaling its personal loan originations into a recession, or might have expected a more upbeat guidance on the back of the strong first-quarter results. SoFi stock is still up 18.66% for the year.

✔️ SoFi Remains Optimistic Profitability Is Possible by End of Year
✔️ SoFi Saw Personal Loans Soar This Quarter. Why That Might Not Be A Good Thing
✔️ SoFi is 'the future of banking for the next generation,' analyst says
✔️ SoFi Technologies, Inc. Reports First Quarter 2023 Results

Global Payments Announces CEO Change

Global Payments (NYSE: GPN) reported its first quarter 2023 results, becoming one more payments company that beat earnings expectations this quarter. Visa, Mastercard, Fiserv, and FIS also beat their earnings expectations. GAAP revenue increased 6.3% YoY to $2.29 billion, adjusted revenue increased 5.0% YoY to $2.05 billion. The merchant solutions segment contributed $1.46 billion in adjusted revenue (up 8.9% YoY), and the Issuer solutions segment contributed $0.49 billion (up 4.7% YoY). GAAP loss per share was $0.04, compared to GAAP earnings per share of $0.87 last year, while the adjusted earnings per share increased 15.9% YoY to $2.40.

The company raised its full-year 2023 outlook to $8.64 - $8.75 billion in adjusted revenue, and $10.32 - $10.44 adjusted earnings per share. Nevertheless, the company’s stock finished the day down 8.62%, as investors did not seem to appreciate the CEO change that the company announced on its earnings call. Thus, the current CEO, Jeff Sloan, will step down from his role on June 1, 2023, and will be succeeded by Cameron Bready, the company's current President and COO. Bready joined Global Payments in 2014 and has served as President and COO of the company since 2019.

✔️ Global Payments Announces CEO Succession Plan
✔️ Global Payments Reports First Quarter 2023 Results
✔️ Global Payments stock falls as ‘surprise’ CEO transition overshadows earnings beat
✔️ Global Payments to replace CEO

Shopify (NYSE: SHOP) announced yesterday that it will release its Q1 2023 results on Thursday (May 4) before markets open, and not after close, as planned previously. Could it be another round of layoffs? The company laid off 10% of its workforce in July last year, but it had a minor impact on the bottom line. Thus, Shopify reported an operating loss of $188.7 million in the fourth quarter of 2022, its latest reported quarter.

• Managing Director, Home Lending – Head of Product and Innovation

  @ JPMorgan

  New York, NY, United States

• Vice President, Payments - Pay by Bank, Open Banking Product Manager

  @ JPMorgan

  Atlanta, GA, United States

• Consumer Deposits Pricing and Strategy Lead

  @ SoFi

  UT, CA, NY, or TX, United States

• Senior Director, Business Lead, Invest

  @ SoFi

  UT, CA, NY, or TX, United States

• Director, Applications System Development

  @ Global Payments

  Alpharetta, GA, United States

That’s it for today! Thank you for reading and see you tomorrow!

Jevgenijs

Cover image: Microsoft Bing Image Creator, Powered by DALL·E, prompt “Jamie Dimon buys a bank, looks excited, in pop art style”

Disclaimer: Information contained in this newsletter is intended for educational and informational purposes only and should not be considered financial advice. You should do your own research or seek professional advice before making any investment decisions.