After rising 230% this year, this emerging crypto stock could still be cheap


In the blink of an eye, Bancorp customers (NYSE: CUBI) may look like another traditional regional bank in Pennsylvania. But the company executed a game plan that led similar companies to much higher valuations and market caps. And this playbook also involves entering the crypto space. The market took notice, pushing the stock up over 225% so far this year. But given the potential of the bank and other banks that have taken similar action, I think this title may still have a long way to go. Here’s why.

Develop great business lines

Customers are already at the cutting edge of technology in the banking industry. One of its strengths is lending in tandem with the US Small Business Administration (SBA), which allows banks to provide loans to riskier businesses that are partially guaranteed by the government. The bank has built an end-to-end platform that combines lending, financing, management and remittance for businesses across the country. Customers claim that this platform allowed borrowers to complete SBA loans in as little as 30 days which is very fast in the SBA world – some SBA loan applications require 148 documents.

When Congress passed the Paycheck Protection Program (PPP) as part of broader stimulus bills to quickly help businesses negatively impacted by the pandemic, it presented a phenomenal opportunity for customers because, while different, the PPP program is based on the traditional SBA program. Clients were not missing a beat, financing around 350,000 PPP loans for a whopping total volume of $ 10 billion. Ultimately, customers will reap $ 346 million in fees from its PPP origins.

Image source: Getty Images.

Now the bank continues to innovate, focusing on the crypto space. Since the very beginning of this year, the bank has been developing a blockchain-based real-time payment system for businesses called Customers Bank Instant Token (CBIT). This allows parties on the network to instantly send and settle payments between themselves at any time. The platform plans to serve a variety of businesses such as OTC trading desks, crypto exchanges, market makers, institutional funds, and other industries such as real estate, manufacturing and logistic. But the clear use case right now is to make it easier to trade digital assets, which unlike traditional stocks never stop trading. And it looks like CBIT has got off to a very promising start, attracting $ 1.5 billion in interest-free deposits from customers during the soft launch. Real-time payment systems like CBIT can be of interest to banks because they encourage stock exchanges and institutional traders to bring in large sums of deposits on which the bank does not have to pay interest.

The management is also launching new lines of credit and continuing to develop its SBA digital banking platform for small businesses. New business lines specializing in commercial lending include fund financing, technology and venture capital banking services, and lending to financial institutions. These loan lines largely provide loans to venture capital and private equity firms, which can be a great deal when done right. In addition, Customers is developing new capabilities on its SBA platform, including term loans, revolving lines of credit, and commercial credit cards.

Always an attractive entry point

Despite an increase of over 225% this year, customers still don’t look that expensive when you look at other competitors who have done what customers are looking to do with CBIT and the digital small business and the platform. -SBA shape.

SBNY price chart at tangible book value
Data by YCharts.

Based on Price vs. Tangible Pounds, which examines a bank’s share price relative to the bank’s value if it were immediately liquidated, Customers lags far behind several banks that have been successful in doing what ‘they plan to do. Capital of Silvergate (NYSE: SI) and Signature Bank (NASDAQ: SBNY) were the first banks to develop real-time payment systems to facilitate crypto trading, while Live Oak Bancshares (NASDAQ: LOB) is an SBA leader and has developed a national small digital banking platform. The spread when you look at the earnings multiples is also very wide.

PE SBNY ratio chart
Data by YCharts.

Right now, I would say Customers is more like Signature, which also has a real-time payments network as well as extensive banking with a growing and diverse array of different lending industries. But Customers has also been able to leverage technology to become a leader in SBA loans like Live Oak. Customers are still near the start of its journey with real-time payments, so I wouldn’t expect it to be trading at the same multiples as Signature just yet.

Monitor progress

Customers have a lot to do right now, with the launch of CBIT, new lending lines, and improvements to its digital SBA platform. What you can watch out for: If CBIT continues to onboard new customers and increase non-interest bearing deposit balances, growth of new customer lines of credit and more progress on the SBA front, which , I think, will be strong because of all the new business customers probably met during the PPP process. Still, there has already been some evidence of some success on these fronts, and if customers can continue to run its exciting playbook, I certainly think the bank can be a big winner with much more customer appreciation. future stock prices.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.


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