Bank Stock Analysis: A Look at SOFI and American Express' Performance

Bank Stocks Rebound: Can the Momentum Continue?

Following a period of underperformance since the Great Recession, bank stocks experienced a notable rebound in August, fueled by expectations of an interest rate cut by the Federal Reserve. This move could stimulate the economy, boost lending, and create a steeper yield curve, particularly with the elevated yield on the 30-year U.S. Treasury bond. Banks typically thrive under a steeper yield curve, as they borrow money at lower, shorter-term rates and lend it out at higher, longer-term yields. In August, the SPDR S&P Regional Banking ETF generated an 11.4% return, significantly outperforming the S&P 500's 3.7% gain. Among the banks that performed particularly well were consumer lenders SoFi Technologies and American Express.

American Express: The Gold Standard of Credit Card Lending

Shares of American Express surged over 12% in August. The company operates two main businesses: credit card lending and payment services. AmEx customers generally consist of individuals with high creditworthiness and significant disposable income, allowing the company to charge premium annual subscription fees. AmEx also operates as a payment network, differentiating it from most other credit card lenders. The company handles transaction processing for AmEx customers and collects fees for each transaction. AmEx is one of the largest scale payment networks, alongside Visa and Mastercard. AmEx continues to generate strong earnings, with credit quality holding up well so far. However, AmEx stock could be vulnerable to pullbacks if monetary policy and the macroeconomic environment do not pan out as expected. Nevertheless, long-term-minded investors can certainly consider the stock.

SoFi: A Stellar Year

Digital bank SoFi Technologies had an even stronger performance than AmEx, surging over 20% in August. The company aims to be a one-stop shop for financial services, offering bank accounts, personal loans, mortgages, investment brokerage, and personal finance tools, as well as banking technology for other businesses. SoFi stock is up nearly 80% this year. The company generated $0.14 diluted earnings per share through the first half of 2025, adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of approximately $460 million, up 63% year-over-year, and revenue exceeding $1.6 billion, up over 30% year-over-year. Most of the company's revenue is still driven by lending, particularly personal lending. However, SoFi trades at a very high valuation, leaving it vulnerable if the economy slips into a recession or if loan funding from the capital markets dries up. Furthermore, because SoFi sells most of its loans, it must mark them to fair value each quarter, which can impact earnings. For these reasons, I am currently staying away from SoFi stock.