With No Interest Rate Cut, Should You Sell SoFi Stock?

The market wasn’t too thrilled last week with Federal Reserve Chairman Kevin Warsh’s new policy to abstain from providing forward interest rate guidance, and a week later, it hasn’t recovered. Rates were kept steady for now, as expected, and the Federal Open Market Committee (FOMC) did provide its own dot plot signaling potential hikes before the year is out.

Investors don’t like high interest rates because they slow the flow of money into the economy. And that’s the Federal Reserve’s goal when it’s battling inflation; too much money in the market makes it cheaper. In the short term, it could also negatively impact many businesses, as less economic activity means less spending.

While that could apply to almost any company, high interest rates could be especially challenging for banks, and specifically for a bank like SoFi Technologies (SOFI +0.17%).

Young banks, higher charge-off rates

In general, bank stocks move as a group relative to broader macroeconomic trends, although each one, of course, has specific features that make it more or less desirable to investors. High interest rates do offer benefits for banks, since they can charge higher interest on loans. However, the positives are usually outweighed by the negatives, which include higher default rates and slower overall activity; fewer people take out loans when rates are high, and people have less money to deposit when the economy is constrained.

This phenomenon tends to show up even more in younger, smaller banks that don’t have the same long-established credit models as bigger banks. SoFi targets younger customers who may not have long-standing credit scores, and lending is its biggest segment, giving it greater exposure to interest rate movements.

Its credit metrics have been improving. In the first quarter, personal loan net charge-offs declined by 0.28 percentage points from last year. Student loan charge-offs have been fairly steady, although a slight increase is in line with broader trends. Borrowers’ credit-worthiness is strong, with weighted average FICO scores of 745 and 767 for personal and student loans, respectively.

Don’t give up on SoFi

Rate hikes could make charge-off rates rise. However, any effect is likely to be short-term and follow broader trends. Also, SoFi’s credit metrics have been improving over time as its track record has grown and it has become choosier about lending terms.

While the market may zero in on SoFi’s credit business, there’s a lot more to it. The financial services segment is growing fast, and these services are mostly fee-based and low-cost. Financial services revenue increased 41% year over year in the first quarter, and contribution profit increased 32%.

The company is also adding record numbers of customers each quarter, including 1.1 million in the first quarter of 2026. Each new customer is another opportunity to grow with SoFi through upselling and cross-selling.

SoFi has a long growth runway, and if you hold it over the long term, you should be well rewarded.