Banking app Dev, back from the brink, is the biggest gainer this year among financial institutions with a 934 percent increase.

Jason Wilk, CEO of Digital Banking Services Daverecalls the absolute low point in his brief career as head of a publicly traded firm.

It was June 2023, and shares of His company had recently sunk below $5 apiece. Desperate to keep Dave alive, Wilk finds himself in Los Angeles Conference for microcap stocks, where he pitched investors on small $5,000 stakes in his firm.

“I’m not going to lie, it was probably the hardest time of my life,” Wilk told CNBC. “Going from a $5 billion company to a $50 million company in 12 months, it was very difficult.”

But in the months that followed, Dave turned profitable and consistently topped Wall Street analyst expectations in revenue and profit. Now, Wilk’s company is the biggest gainer among U.S. financial stocks for 2024, up 934% year-to-date through Thursday.

The fintech firm, which makes money by making small loans to cash-strapped Americans, is a sign of a larger shift that is still in its early stages, according to an analyst at JMP Securities. Devin Ryan.

Investors dumped high-flying fintech companies as a wave of unprofitable firms like Dev in 2022. went public through special purpose acquisition companies.. The atmosphere suddenly changed, from one of favorable growth at any cost to deep skepticism about how money-losing firms would navigate rising interest rates as the Federal Reserve fought inflation.

Now, with the Fed easing rates, investors have flocked back to financial firms of all sizes, including alternative asset managers such as KKR And credit card companies like American Expresswith market caps of at least $100 billion and $200 billion, respectively, the top performers among financial stocks this year.

Major investment banks including Goldman SachsThe biggest gainer among the six biggest U.S. banks, Wall Street deals have also picked up this year on hopes of a recovery.

But it’s fintech firms like Dave and others. Robin HoodThe commission-free trading app, Ryan said, is the most promising headline for next year.

Robinhood, whose shares have risen 190% this year, ranks among financial firms with a market cap of at least $10 billion.

“Both Dave and Robin Hood went from losing money to becoming incredibly profitable firms,” ​​Ryan said. “They have set their house in order by growing their income at a rapid rate while managing expenses at the same time.”

While Ryan sees investment banks and alternative asset management as approaching “settled” levels, he said “fintechs still have a long way to go; they’re early in their journey.” ”

When Donald Trump’s election victory last month fueled interest in the sector, financial institutions had already started to take advantage of the Fed’s easing cycle. Investors expect Trump to ease regulation and allow more innovation in government appointments, including ex-PayPal Executives and Silicon Valley investors David Sachs as AI and Crypto Czar.

These expectations have boosted shares of strong players such as JP Morgan Chase And Citigroupbut it has more impact on potential disruptors like Dave who could see even more upside from a looser regulatory environment.

Dave’s has carved out a niche among Americans underserved by traditional banks by offering fee-free checking and savings accounts.

According to Wilk, it mostly makes money by giving customers small loans of about $180 to help them “pay for gas and groceries” until their next paycheck. Dave makes an average of about $9 per loan.

Consumers come forward by avoiding more expensive forms of Credit from other institutions, including the $35 overdraft fee charged by banks; Dave, who is not a bank, but Partners Plus, there are no late fees or interest on cash advances.

Wilk said the company also offers debit cards, and interchange fees for transactions made by Dave customers will make up a growing portion of revenue.

Although the fintech firm faces far less skepticism now than it did in mid-2023 — all of the seven analysts who track it, according to FactSet, rate the stock a “buy” — Wilk Said the company still has more to prove.

“Our business is much better than when we went public, but it’s still valued at 60% below the IPO price,” he said. “Hopefully we can claw our way back.”