Novatti Shares Up 6% as It Draws Closer to Bank Launch (ASX:NOV)

To say 2021 has been a good year for Novatti Group Ltd [ASX:NOV] is an understatement.

As my colleague Lachlann Tierney has discussed previously, the NOV share price had made huge gains in the past 12 months.

Today, that momentum has continued, with the NOV share price is up 6.45% at time of writing. Rising higher on the back of further updates from the company regarding its banking ambitions.

And thanks to a new strategic partner, those ambitions are drawing much closer…

Ready and raring to go

For the unaware, Novatti has been pursuing this new business venture for well over a year now. Laying out a road map to turn this remittance specialist into a fully-fledged bank.

However, the application for their banking licence was put on hold in April last year. Stalled by a decision from the adjudicating regulator (APRA) to not issue any new licences in the wake of COVID-19.

And now, with the worst of the pandemic looking likely to be behind us, APRA has started the process once again. With deliberation over licence applications, like Novatti’s, recommencing from March this year.

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So, with any luck, they should have a decision soon.

However, management hasn’t been just content to wait and see. Novatti has been busy looking for further ways to ensure these banking ambitions can be realised. And that is precisely what they have shared in today’s announcement…

BC Investment Group — a subsidiary of the much larger Far East Consortium International Ltd [HKG:0035] — is the latest strategic partner to come aboard. Not only bringing a wealth of experience when it comes to banking, but also a $2 million seed investment in Novatti.

Those funds will help ‘accelerate development’ of the banking business, according to management.

And, more importantly, has prompted the proposal for an additional $13 million in the form of a Series A funding round. With both Novatti and BC Invest stating their intent to commit a further $3 million and $2.5 million, respectively, into the bank venture.

However, these additional funds are conditional on receiving the banking licence from APRA.

And on top of that…a further $3 million has been raised via a share placement to key investors. Including senior managers from both BC Invest and FEC.

So, Novatti has a healthy helping of fresh capital to ensure their banking plans go ahead.

As Managing Director Peter Cook comments:

Developing Novatti’s new banking business is a key pillar of our long-term growth strategy to provide value-add to our existing, established businesses. To this end, we are delighted to have secured this strategic partnership with BC Invest, who bring with them strong financial services capabilities, including through their existing lending operations, as well as key customer acquisition channels.

In addition, BC Invest’s direct investment in Novatti will help further accelerate our broader growth strategy and provides additional opportunities for new business creation. With this depth of partnership, we look forward to working with the BC Invest team.

What’s next for Novatti Share Price?

Looking ahead, it seems the only obstacle in Novatti’s way is the decision from APRA. One that will ultimately determine whether this venture goes ahead or not.

And while it is never a sure thing until we have confirmation, these partnerships and capital injections should signal an expectation that Novatti is likely to get the green light.

For shareholders, that is certainly something to get excited about.

Especially given the already impressive performance of this stock in recent months.

But that just goes to show how quickly these emerging fintech players can shoot up. With only a little good news needed to start the upward momentum for these stocks. Even without necessarily strong financial earnings.

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Regards,

Ryan Clarkson-Ledward,
For Money Morning


Ryan Clarkson-Ledward is an Editor at Money Morning.

Ryan holds degrees in both communication and international business. He helps bring Money Morning readers the latest market updates, both locally and abroad. Ryan tackles all the issues investors need to know about that the mainstream media neglects.

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