Bancorp’s Fintech Comeback Gains Momentum

Key Points

• The Bancorp posted second-quarter diluted earnings per share of $1.45, beating estimates, as fintech fee income and gross dollar volume both grew sharply.
• Criticized loans, including troubled real estate bridge loans, fell significantly from a year earlier, easing the credit concerns that had hurt the stock since 2024.
• Analysts hold a Moderate Buy consensus rating with roughly 10% upside, while Bancorp continues raising guidance and repurchasing shares to boost per-share growth.

The Bancorp, Inc. NASDAQ: TBBK has spent the past two years working to live down a credibility crisis, and its latest quarter suggests it is largely succeeding.

The company hit a rough patch in early 2024 when a short seller questioned its financial results.

A year later, The Bancorp announced an accounting restatement tied to its real estate bridge lending book.

But the stock has since clawed its way back, and analysts have maintained a positive outlook.

With a moderate upside to its shares and consumer spending still going strong, investors now need to ask how much further this bank has to grow.

Powering Fintech Behind the Scenes

Even though The Bancorp is a bank, it has no branches and no household brand name. Instead, it operates behind the scenes as one of the country's largest "banking-as-a-service" sponsors.

The company holds deposits and issues cards so fintech apps can act like banks without becoming one, such as for Chime NASDAQ: CHYM, PayPal NASDAQ: PYPL and Cash App from Block NYSE: XYZ. In fact, the company this year was listed as the top issuer of prepaid cards and the sixth-largest issuer of debit cards in the United States.

Fintech Growth Drives Stronger Earnings

The Bancorp is now working to confirm that the issues of the past two years are well behind it. The second quarter gave the bulls plenty to work with. Bancorp reported diluted earnings per share of $1.45, up 14.2% from $1.27 a year earlier and comfortably ahead of the $1.36 Wall Street had modeled.

Consolidated net income came in at $60.7 million, return on equity hit 34.7%, up from 28.4% in the year-ago quarter. The efficiency ratio, a measure of how much it costs the bank to generate a dollar of revenue, held relatively steady at a lean 41%. The bank also posted a return on assets of an impressively high 2.51% for the quarter.

Growth is coming squarely from the fintech side of the business. Gross dollar volume moving across Bancorp's partner programs rose 22.5% year-over-year to $53.45 billion, and total fintech fee income climbed to $40.9 million from $35.6 million. Fintech loans now amount to $901.5 million, up from $680.5 million a year earlier.

Shares Rebound From Recent Weakness

These numbers were a positive signal for a bank that has had a rocky journey the past couple of years. Although the stock is down roughly 4% since the start of the year, it has gained more than 18% in just the past three months. That is still a far cry from its 52-week high of $81.65 per share, achieved before issuing disappointing earnings for last year’s third quarter.

The company was also hit with difficult news in recent years. In March 2024, short seller Culper Research accused Bancorp of understating losses in its real estate bridge lending portfolio and holding reserves it called grossly inadequate.

A year later, the company disclosed that investors could no longer rely on its 2022 through 2024 financial statements because of accounting issues tied to consumer fintech loan losses, triggering a securities class action lawsuit that remains pending.

Credit Concerns Continue to Ease

The latest report, however, showed that the story that scared investors most in 2024 has flipped in Bancorp's favor. Total criticized loans, or those being watched for potential problems, fell to $146.7 million from $305.2 million a year earlier. In particular, the real estate bridge loans at the center of the earlier controversy dropped $169.6 million from the second quarter of 2025.

At the same time, management raised full-year 2026 earnings guidance to a range of $5.95 to $6.05 per share and reiterated 2027 guidance of $8.10 to $8.30.

Buybacks Return Capital to Shareholders

In addition, though the company does not pay a dividend, management has said it intends to keep returning close to 100% of net income to shareholders through buybacks, another way to boost per-share growth.

Bancorp repurchased $50 million of stock in the second quarter, representing about 2% of outstanding shares. It has bought back $403.6 million worth of shares since mid-2025, shrinking its share count to about 41 million.

Analysts See More Upside Ahead

Wall Street today is generally optimistic. Seven brokerages now cover the stock with a consensus rating of Moderate Buy and an average price target near $71.17, implying an upside of abaout 10%.

Overall, four analysts rate the stock a Buy, one has it listed as a Strong Buy, and two suggest a Hold. The highest 12-month target price is $88 per share, while the lowest is $57. Several analysts have raised their targets in recent weeks, citing improving credit trends and fintech growth, while others have reiterated their Outperform or Buy recommendations.

Strong Fundamentals Come With Risks

Taken as a whole, Bancorp's fundamentals stand on their own. The bank has double-digit earnings growth, accelerating fintech fee income, criticized loans down by more than half, and management raising guidance. A shrinking share count also benefits investors.

The risk, however, is that much of that good news is already reflected in the stock's trading. Bancorp also depends heavily on a small number of large fintech partners for deposits and fees, and losing even one, or seeing a partner pursue its own banking charter, could dent results quickly.

Investors comfortable with volatility might look to The Bancorp for its growth and buyback story. The company appears to be moving in the right direction, but the question is whether that direction will include more bumps on the way.

Continue following MarketBeat

Add MarketBeat as your preferred source on Google to see our latest stories in your feed.

Add As Preferred Source