It's been a tough year for the financial industry. Over the weekend, FDIC officials took over First Republic Bank, conducting a successful bidding process to find an orderly path for depositors to keep access to their money. Many have hoped that the rest of the sector would be able to move on once First Republic's problems got addressed.
However, another pair of bank stocks had sharp declines Monday morning, and interestingly, both of them trade on the Nasdaq Stock Market, weighing on the Nasdaq Composite (^IXIC 0.30%). Below, you'll learn more about why SoFi Technologies (SOFI -10.11%) and Valley National Bancorp (VLY -1.50%) were among the worst performers in the stock market this morning.
SoFi swings hard as deposits rise
Shares of SoFi Technologies were quite volatile on Monday morning. They initially rose after the company released its first-quarter financial report, but then gave up those gains and were down 9% as of 11 a.m. ET.
SoFi was generally pleased with the progress of its online banking business model. Net revenue jumped 43% year over year to $472 million. Although the bank lost $34 million, or $0.05 per share, those losses were much narrower than they were in the first quarter of 2022. Adjusted pre-tax operating earnings also soared to $76 million from $9 million in the year-ago period.
SoFi added 433,000 new customers in just the past three months, with its current base of 5.7 million members rising 46% from where the figure was 12 months ago. Total deposits jumped $2.7 billion in the first quarter alone to rise to $10 billion at the end of March. Moreover, SoFi is pleased that its customers are generally of high credit quality, with a median FICO score of 749.
Investors also got higher guidance for 2023, with SoFi projecting adjusted revenue of $1.955 billion to $2.02 billion as well as an $8 million boost to adjusted pre-tax operating earnings estimates. The bank believes it can be profitable on an unadjusted basis by the fourth quarter.
Yet a few areas of concern arose. Galileo digital payments accounts were down from three months ago and saw year-over-year growth cut in half, and that could take away some diversification from SoFi's overall operations. Moreover, SoFi is paying high rates on deposits, and it remains to be seen how loyal customers will be if the bank changes its strategy in that regard in the future.
Valley gives back its gains
Elsewhere, shares of Valley National Bancorp fell nearly 15% Monday morning. The parent of New Jersey's Valley Bank had seen big gains late last week, but investors lost some of their enthusiasm about the regional bank's stock on comments from Wall Street analysts.
Valley shares had jumped 9% on Thursday and Friday after the bank released solid first-quarter financial results. Adjusted net income climbed 28% year over year to $155 million, which worked out to $0.30 per share. Loans increased 15% to $48.7 billion, while deposits held relatively steady at $47.6 billion as of March 31. Valley emphasized that many of its customers have had long relationships with the regional bank.
However, Raymond James cut its rating on Valley National from strong buy to market perform. The analysts argued that it will be more costly for Valley and its banking peers to get funding for the foreseeable future, and that could present a threat to longer-term revenue growth.
With the move, Valley's stock is down more than 40% from its highs in 2021. That's a common theme across the banking sector, and it'll be interesting to see if the hit to Valley's actual business proves to be as significant as its shareholders fear right now.
