Upstart's Stock Performance#
Upstart Holdings (NASDAQ:UPST) saw its shares rise by 2.25% in after-hours trading on Tuesday. This increase followed the company's announcement regarding its intention to apply for a national bank charter.
Application for Bank Charter#
The AI-driven lending marketplace plans to submit applications to both the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation. If approved, this would lead to the establishment of Upstart Bank, N.A. Additionally, Upstart Holdings will seek approval from the Federal Reserve to become a bank holding company.
Benefits of a National Bank Charter#
If Upstart receives regulatory approval for the bank charter, it could significantly reduce operational, regulatory, and financial complexities for the company and its third-party capital sources. Annie Delgado, Upstart’s Chief Risk Officer, is proposed to be the Chief Executive Officer of Upstart Bank. A national bank charter would place Upstart's lending activities under federal oversight, allowing the bank to access deposit funding and lend directly to consumers with a consistent rate and fee structure. This could lead to lower costs and more lending opportunities in certain areas.
Continued Collaboration with Financial Partners#
Despite its plans to establish Upstart Bank, the company clarified that it will continue to rely on banks, credit unions, and institutional funds as the primary sources of capital for the majority of loans on its platform. Upstart is not looking to compete with its depository partners for local customer deposits or checking accounts.