Financial firms brought in record funds from their initial public offerings in 2014, and as investors prove the strength of the U.S.’s economic recovery, the successful IPOs of innovative financial startups suggest a new line of competition is ready to take control of the lending market from the traditional big banks.
Banks and consumer-finance firms raised a combined $16.8 billion in 2014 IPOs, the data show, making this year the best for financial IPOs since 2008 and the best for IPOs altogether since 2000.
“For some of the biggest deals, the IPO was about putting the financial crisis in the rearview mirror,” Mercer Capital managing director for financial institutions Jeff Davis said.
And the companies that are at the steering wheel, experts say, are those using new technology to offer alternatives to traditional borrowing methods. Among this year’s IPO winners include peer-to-peer loan aide Lending Club, which raised $1 billion from its IPO earlier this month and earned a valuation of $8.5 billion – higher than all but 14 U.S. banks, reports said. Meanwhile, online small business lender OnDeck Capital outperformed and raised $200 million.
China’s Alibaba made headlines with its record-smashing $25 billion debut, but the rest of the Top 5 were the U.S. IPOs of Citizens Financial, Synchrony Financial, Ally Financial, and Santander Consumer USA Holdings.
Experts say surging equity markets, investor optimism and demand for financial service offerings created an ideal environment for successful IPOs for the U.S.’s financial players. And with interest rates expected to climb next year, 2015 is expected to yield another stellar performance for financial debuts.
“If the stock market stays robust and consumer credit remains in good shape,” Davis said, “next year will be another great year for financial-service IPOs.”
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