Actions of The Bancorp (NASDAQ: TBBK), a $ 7.7 billion asset bank in Delaware, was traded more than 10% more as of 11 am EDT today, after it came to light that the bank would soon join the S&P SmallCap 600 index.
The S&P SmallCap 600 covers US small cap stocks with market cap ranging from $ 700 million to $ 3.2 billion at the time the company is added to the index. Bancorp, which will enter the index on Friday, currently has a market capitalization of $ 1.42 billion.
Stocks tend to appreciate when added to an index, because the funds that accompany that index must now buy the shares. In addition, being added to an index results in greater visibility for the stock.
Bancorp also released burst earnings results in the first quarter last week, in which net profit of $ 26 million more than doubled the bank’s net profit in the first quarter of 2020.
Bancorp is a niche bank that I like a lot now. This provides services for fintech companies that do not have a bank license, but want to provide banking services to their customers.
For example, large fintech companies like Paypal and Chime are able to offer banking services, such as debit cards, using The Bancorp to handle back-end transactions.
By serving these customers, The Bancorp obtains cheap deposits that can be borrowed on its own and many fee income through prepaid and debit card fees. All the work the company has done to develop these capabilities is really paying off now.
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