If you could Live Oak Bancshares (NASDAQ: LOB) A.D. At the beginning of 2020 (before the epidemic), it looked like a lot of other bank stocks. Live oak was trading at less than $ 20 per share, and about 150% of it was sold at TBV, which is how much it would cost if the bank was released and the banks are relatively traded.
For now, Fast Forward and Live Oak shares more than $ 93 and 600% to TV. Banks don’t normally get that much value – at least after the Great Depression. How did this happen?
Well, investors stopped considering live oak as a bank and started seeing a growing Fintech company. Let me explain.
From bank to fintech
While the price of Live Oak shares may rise in the short term, the administration has been working on this transition for many years. Contrary to popular belief, many banks recognize the importance of technology but it takes time to make big changes.
Live Oak is a non-branch bank primarily serving small businesses through the US Small Business Administration (SBA) Loan Program. Under this program, banks work with SBA to develop semi-government-approved loans. Live Oak provides regular loans and participates in other government-guaranteed loan programs in the US Department of Agriculture.
Although it has very few assets and resources, Live Oak is the largest SBA lender in the US, regularly hitting the largest banks in the country. Achieving this is a technology-based platform that serves small businesses nationwide. According to the Bank’s Annual Report, the forum will use the platform to streamline the company’s loan process, customer experience, reporting metrics and service activities.
A.D. In 2020, Congress introduced the Paycheck Protection Program (PPP) as a major incentive to help small businesses affected by the epidemic. PPPP was built on the basis of the SBA loan program, which gave Live Oak a once in a lifetime opportunity, of which the bank took full advantage of it. Direct Oak PPP loans earned $ 2.3 billion, bringing the net over $ 80 million in net repayments.
But the success of Live Oak is not due to the fact that it knows the full scope of SBA loans – many lenders lend to SBA. Live Oak is a technology platform that facilitates the SBA loan process. Live Oak’s Inheritance Infrastructure enables the small network to manage and participate in the national network.
Creating the next generation technology platform
Several years ago, Live Oak began investing directly in Fintech companies because he knew the place well and wanted to stay on top of innovation that could make a difference to the bank. Now, the bank has made many successful investments and added to its own stack of technology.
One of these companies, Phoenix, is a cloud-based real-time banking platform that allows you to create open banking services. Most banks use old legacy core systems to carry out their day-to-day banking operations, which can be confusing and difficult for banks to create new innovations. During Q3, Live Oak successfully switched all of its retail and commercial deposits to the Phoenix Core platform.
Live Oak President Huntley Garriot said in a Q3 call for revenue that the bank’s new technology stack on Phoenix will enable the production of live oak products and grow existing ones faster and more cost-effectively than banks. Using older major banking platforms. The Finxact platform provides data benefits, according to Gariot.
You can see the platform that Live Oak is building here. Many Fintech companies that implement these capabilities are powered by live oak by Fintech beginners who have previously invested.
Can Live Oak stay on the new track?
Since the outbreak, investors have seen direct payments for oak investments. Adjusted Advance Payments The Bank’s net income, a good operating profit indicator, grew by about 150% between the first quarter of 2020 and the third quarter of this year. Borrowings have increased by $ 1 billion over the past two quarters, a total of $ 8.1 billion for the bank. With fast-growing profits and new innovations in the future, live oak will be sold at 600% to TV and nearly 25 times the revenue. It is no longer valued as a traditional bank and is now seen as a Fintech company.
If we are given this new name, I am sure that Oak will continue to move higher. From P.P.P. Not only with but also live oak in PPP. Reason can meet many new customers. With the exception of PPP loans, the Bank’s total debt balance is close to $ 1.5 billion a year, which is difficult for most sectors. Although the company does not generate $ 1 billion in loans every quarter, the administration seems optimistic about the future of the pipeline. With the launch of the new technology platform and the launch of new products, the Bank needs to give more momentum to Live Oak’s stock by further penetrating its existing customer base and attracting more small businesses.
This article represents the author’s opinion, which does not agree with the “official” decision of the Motley Ful Premium Advisory Service. We are Motoli! Asking for investment opportunities – even our own – can help us all think critically about investing and make decisions that will make us smarter.