Shares of Upstart Holdings (NASDAQ:UPST) rose 2.25% in after-hours trading on Tuesday after the company disclosed plans to pursue a national bank charter.
In a regulatory filing, the AI-driven lending marketplace said it will submit applications to the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC) to form Upstart Bank, N.A. At the same time, Upstart Holdings will seek approval from the Federal Reserve to be designated a bank holding company.
Upstart framed the charter pursuit as a way to reduce operational, regulatory, and financial cost and complexity for both the company and the third-party capital providers that fund many of the loans originated on its platform. The company identified Annie Delgado, its Chief Risk Officer, as the proposed Chief Executive Officer of Upstart Bank.
Under the company’s description, a national bank charter would place Upstart’s lending activity within a federal prudential framework. That status would allow the new bank to accept deposits as a funding source and to make consumer loans directly using a single, consistent rate and fee structure. Upstart said this capability could translate into lower costs and expanded lending opportunities in certain jurisdictions if regulatory approvals are granted.
Despite the plan to establish a depository unit, Upstart emphasized that banks, credit unions, and institutional funds will remain the source of capital for the majority of loans originated through its marketplace. The company also stated it does not intend to compete with its depository partners for local customer deposits or checking-account relationships.
The proposals are explicitly subject to regulatory approvals from the OCC, FDIC, and the Federal Reserve. The company presented the charter as a structural change aimed at streamlining funding and lending mechanics, but any anticipated operational or financial benefits are contingent on the applications being accepted by the relevant federal regulators.
Context and next steps
Upstart will proceed through the formal application processes with the OCC and FDIC to form Upstart Bank, N.A., and separately seek bank holding company approval from the Federal Reserve. The timing and outcome of those processes were not specified in the company’s announcement.