Could a Potential Bank Charter Lift Fiserv?

Shares of Fiserv (NYSE:FI) were trending lower on Tuesday on mixed fourth-quarter earnings results. The stock was down by about 2.5% on the day, trading at around $140 per share.

However, looking beyond the short-term volatility, this fintech has a promising earnings outlook and an initiative percolating that could serve it well in the long term: a special bank charter.

Earnings and revenue up year over year

Fintech is a relatively new term, but Fiserv has been a fintech company long before the moniker became popularized. Founded in 1984, Fiserv provides the technology that helps financial institutions move money and process payments. The company is what is called a “merchant acquirer.” In fact, it’s considered the largest non-bank merchant acquirer.

Fiserv had a pretty good year in 2023, with its stock returning 31% for the year. It capped off the year with a mixed bag in the fourth quarter, beating earnings estimates but missing revenue projections.

That said, Fiserv’s revenue was still up by about 7% year over year to $4.9 billion in the quarter and up by about 8% for the full year to $19.1 billion. With its expenses roughly flat in the quarter, Fiserv’s net income rose 11% year over year to $889 million, or $1.45 per share. For the full year, the company’s net income jumped 24% to $3.1 billion, or $4.98 per share.


Although Fiserv stock dropped Tuesday on the revenue miss, but its overall numbers were very sturdy.

“Fiserv closed out 2023 with accelerated organic revenue growth of 12%, representing our third consecutive year of double-digit growth, as our momentum continued,” said Frank Bisignano, chairman, president and CEO of Fiserv, in the earnings report.

Rosy outlook

The outlook for Fiserv is promising, given the guidance it has provided for the next few years.

For 2024, the fintech firm projects robust organic revenue growth of 15% to 17%, which is even higher than the 11% to 13% growth it predicted at its investor day conference last fall. It also projects adjusted earnings per share in the range between $8.55 to $8.70, which would represent growth of 14% to 16% over 2023. That’s roughly in line with the 13%-to-17% growth estimate at the investor day.

Further, the company predicts a 100-basis-point increase in its adjusted operating margin over the excellent 40.7% mark in 2023 and estimates free cash flow at $4.5 billion, up from $4 billion in 2023.

“We are confident in our ability to continue driving strong results and plan to extend our double-digit adjusted earnings per share growth to a 39th consecutive year,” Bisignano said of the outlook.

Looking out longer term, Fiserv sees its organic revenue growing 9% to 12% annually in both 2025 and 2026, with annual adjusted EPS growth of 14% to 18% per year in those years.

Looking to get a bank charter

While these numbers bode well for Fiserv, there is also a potential game changer on the horizon as the company applied for a special bank charter in the state of Georgia.

Georgia’s Department of Banking and Finance has a special charter available for Merchant Acquirer Limited Purpose Banks (MALPBs). It has been available for 12 years, but no merchant acquirers have been able to take advantage of it for several reasons. However, that may be changing with Fiserv’s pending application.

“The MALPB charter was created to allow entities engaged in merchant acquiring or settlement activities to directly access payment card networks,” the Georgia Department of Banking and Finance website states.

There are several requirements, but if Fiserv does get approved for the charter, there are significant advantages. The main benefit is that it would be able to authorize, clear and settle credit and debit card transactions in house, as opposed to hiring a third-party bank partner to do it. That would give Fiserv more control over its costs and processes and would likely reduce its expenses.

In a statement to Digital Transactions, Fiserv management said the company has no intention of becoming a traditional bank and will continue to partner with financial institutions that want to remain as acquiring sponsors.

“We are taking this step in response to recent market changes, as third-party financial institutions that have traditionally provided access to the card networks as sponsor banks increasingly focus on other areas of their business,” the statement read.

Fiserv could have a decision from regulators this quarter or early next, so more details will emerge when and if it is approved.

Analysts are generally fairly bullish on Fiserv stock, even without the charter. With a reasonable forward price-to-earnings ratio of 16, a rosy revenue outlook, and the potential for a game-changing bank charter, it is a stock to watch.


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