The Novatti (ASX:NOV) share price is surging 7% today. Here’s why

The Novatti Group Ltd (ASX: NOV) share price is gaining today, following news the company is ready to launch its banking business.

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Novatti Group Ltd (ASX: NOV) shares are gaining today, following news the company is ready to launch its banking business. At the time of writing, the Novatti share price is up 7.2%, with shares in the company swapping hands for 67 cents apiece.

Let’s take a closer look at the news the banking and payments company released this morning.

Ready for action

Novatti announced today it has partnered with international financial service provider BC Investment Group Holdings. As a result, Novatti is now in a position to launch its banking business, subject to regulatory approval.

As part of the partnership, BC Invest will provide Novatti’s dedicated banking subsidiary, Novatti B Holding Company (NBHC), with $2 million in its first round of funding. In return, BC Invest will receive a 19.9% stake in NBHC.

In its second round of funding, BC Invest will provide NBHC with another $2.5 million. Novatti will also invest another $3 million into NBHC.

After the funding rounds, Novatti will hold a 57% stake in NBHC while BC Invest holds a 19% stake.

At this point, NBHC will have a post-money valuation of $35 million. This will allow it to begin its banking business immediately after it receives regulatory approval.

Novatti’s application for a banking licence from the Australian Prudential Regulation Authority (APRA) was delayed due to COVID-19. APRA has now resumed operations as normal.

BC Invest will also pay $3 million for approximately 6.8 million shares in Novatti, which equals 43.9 cents per share.

BC Invest’s CEO David Hinde said the company’s investment in NBHC would provide customer access to Novatti’s payment services before transition to the proposed digital bank’s platform. It will also help the development of its own technology platform.

Commentary from management

Novatti Group managing director Peter Cook commented on the partnership, saying:

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…

[BC Invest’s] capabilities will be invaluable in bringing income-generating products, including lending products, to market, which APRA has made clear is a priority for all banking licence applicants in addition to their deposit-taking credentials.

Novatti share price snapshot

The Novatti share price has performed well on the ASX lately.

Currently, shares in Novatti are up 144% year to date and have risen 273% over the last 12 months.

The company has a market capitalisation of around $144 million, with approximately 232 million shares outstanding.

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Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned.

The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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