The SelfWealth Ltd [ASX:SWF] share price has had a turbulent past few months — like many other companies.
The Aussie peer-to-peer online brokerage platform was boasting a 12-month return of 105% not too long ago.
Now, that return sits at 40%.
SWF has made a name for itself by going after the banks’ brokerage profits.
It advertises itself as a cheaper alternative to the banks’ steep brokerage fees, only charging its customers a small flat fee.
Source: Trading View
SWF (green) share price of the past five days versus CBA (yellow), WBC (red), ANZ (blue), NAB (black)
With the latest round of stimulus introduced by the Australian government, it seems investors want back in with the banks.
Surge in Big Four shares a red herring?
Make no mistake, government stimulus has certainly helped calm nerves on the market.
It was only a month ago when we watched the banks’ share prices nosedive on the back of profits being hit by low interest rates and declining mortgage numbers.
In my view, the reality is still the same today — nothing has changed. If anything, it’s getting worse.
In the US banks have seen profits from brokerage fees wiped away as start-ups battle for client assets has seen some fees cut to zero.
A similar battle has already begun in Australia and my guess is that it won’t be too long until we see a corresponding shift.
Because fee reductions mean one less stream of revenue, I expect the banks’ bottom line to take a hit. This, in addition to the various pressures caused by the coronavirus outbreak.
Back in October last year, when the brokerage fees raced to zero in the US, all major brokers immediately traded down following.
My take is that investors are so desperate for perceived safety that they are ignoring the smaller (riskier/yet potentially more rewarding) fintechs that are going to continue to chip away at Big Four’s profits.
What does this mean for SWF’s share price?
Earlier this month, SWF successfully completed a $3 million cap raise via share placement.
Shares were priced modestly at 14 cents per share, a discount to the previous close of 15 cents at the time of placement.
But the share price has suffered since.
However, there is optimism for the online broker.
Of the approximately 760,000 online traders in the country, roughly 30,000 switch brokers every year.
SWF as managed to double its market share to an estimated 4% (CommSec dominating with 50%) since its inception.
The company projects it will acquire 15,000-plus new active traders this year, a figure representing about 25% of new and switching investors.
If you share the same scepticism for Australia’s Big Four banks and are looking to invest in the space, then check out our report on Bank Busters: Three Aussie tech plays outsmarting the Big Four banks. Download for free here.
For Money Morning