SOFI

Could SoFi Become the Next JPMorgan Chase?

Banking disruptor SoFi (NASDAQ: SOFI) has produced impressive growth recently. Since the beginning of 2020, its customer base has grown from less than 1.1 million to over 7.5 million. Its Galileo fintech platform has nearly quintupled in size, and overall revenue has climbed from $621 million in 2020 to more than $2 billion in 2023, with the company reaching profitability for the first time in the fourth quarter of last year.

This tremendous momentum begs the question: How big could it get? Could SoFi realistically become one of the largest U.S. banks eventually if it continues to lure customers away from traditional banks?

While none of us have a crystal ball, here's a comparison with the largest U.S. bank JPMorgan Chase (NYSE: JPM) to illustrate just how much bigger SoFi would need to become.

SoFi vs. JPMorgan Chase: The numbers

To give you an idea of the vast difference in scale between these two bank stocks, here's a side-by-side comparison of some of the key numbers.

Metric

SoFi

JPMorgan Chase

Total assets

$30.0 billion

$3.88 trillion

Deposits

$18.6 billion

$2.4 trillion

Loans

$23.0 billion

$1.3 trillion

Net interest margin (Q4 2023)

6.02%

2.82%

Customers

7.54 million

86 million

Banking branches

0

4,700

2023 revenue growth

35%

23%

2023 net income

-$301 million

$37.7 billion

Market cap

$7.6 billion

$522 billion

Price-to-book ratio

0.996

1.496

Data source: Company financial reports. JPMorgan Chase customer count includes individuals and small businesses only.

As you can see, SoFi isn't anywhere near the same league as JPMorgan Chase. Its total assets are about 0.8% of JPMorgan Chase's, its customer count is more than an order of magnitude lower, and while SoFi generated a net loss in 2023 (but a fourth-quarter profit), JPMorgan Chase's net income for the year was about five times SoFi's entire market cap.

Having said that, the numbers show some key advantages for SoFi. For one thing, because of the high-interest nature of its loan business, which primarily consists of personal loans, SoFi has a net interest margin that's more than double that of its largest counterpart. It also has much faster revenue growth, and the gap would be even wider but JPMorgan Chase benefited from a major acquisition in 2023. And SoFi doesn't have the cost structure associated with maintaining and staffing about 4,700 physical branches.

Both banks also have very different businesses beyond their basic consumer banking activities. Just to name a few things, JPMorgan Chase operates a massive investment banking business and has a wealth management business with a staggering $5 trillion in client assets. It also provides banking services for corporate and government clients.

SoFi doesn't do any of these things but offers a fintech platform known as Galileo that provides the banking infrastructure for tens of millions of financial products for its clients.

Will SoFi ever become one of the big banks?

The top-tier U.S. banks have changed over time and will likely change in the future. In other words, the "big four" banks of today -- JPMorgan Chase, Bank of America, Citigroup, and Wells Fargo -- aren't necessarily going to be the biggest banks in 10, 15, or 20 years from now.

SoFi has a long way to go to join this elite group. It's arguably the most successful fintech when it comes to becoming an all-in-one financial institution. But it's one thing to grow from $0 to $20 billion in deposits. Growing from $20 billion to $1 trillion is something else entirely.

Management's execution so far has been successful, and the pace at which new products have been added (and adopted by customers) has been impressive. If SoFi's leadership team can keep the momentum going, things could get very interesting in the coming years.

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Citigroup is an advertising partner of The Ascent, a Motley Fool company. Bank of America is an advertising partner of The Ascent, a Motley Fool company. Wells Fargo is an advertising partner of The Ascent, a Motley Fool company. JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Matt Frankel has positions in Bank of America, SoFi Technologies, and Wells Fargo. The Motley Fool has positions in and recommends Bank of America and JPMorgan Chase. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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