US markets drag fintech stocks down

US markets drag fintech stocks down

Cognizant, Vasco and Broadridge were among the worst-hit last week as the Finextra50 Financial Technology Index slipped 3.4% to close last week at 83.6. Without the see-sawing upswing of the Indian fintech sector, the picture would have been even bleaker.

The index's biggest losers last week were all US stocks, being punished by investors' bearish views on the financial and technology sectors. In terms of specific bad news driving share price movement, only Broadridge Financial Solutions' counterpary credit downgrade from S&P and Fidelity NIS's reported lay-offs at its Florida lender processing division are worth noting.

On Wednesday Standard & Poor's Ratings Services lowered its counterparty credit rating on Broadridge to 'BB/B' from 'BBB-/A-3', citing concerns about management's risk appetite as well as corporate and risk management governance, in particular at the regulated broker dealer Ridge Clearing.

Broadridge ended the week down 9.11% to $16.76.

S&P's said the balance-sheet risks taken outsized the capital base at Ridge and consolidated the capital base at Broadridge. They also stressed the firm's liquidity capacity.

Fidelity National Information Services (NIS), ended the week down 7.65% to $35.23, after local press in FLorida reported dozens of sackings at its lender processing division. In February the company announced plans to spin off the division by mid-2008 under the name Lender Processing Services Inc.

Even positive news for some companies, such as SEI's new Chinese distribution deal, and S1's new client win and partnership announcement, failed to lift the pessimism.

Besides Broadridge and Fidelity NIS, other significant fallers last week were:

Gainers last week were dominated by Indian fintech stocks. Nucleus Software was the biggest gainer, rising 24.60% to close at Rs235.50. In a week during which it announced a new client win for its FinnOne application (Abu Dhabi-headquartered Reem Finance) the company has pared back recent weeks'losses but is still trading down 35% for the year.

i-flex rose 13.84% last week to finish at Rs1094.95. The company has announced it intends to change its name to Oracle Financial Services, in a move that closely aligns it with its parent company Oracle, which owns 81% of the company. Indian investors who hold much of the remainder viewed the move as a positive step to improving its potential in the US market, while the neverending speculation about a total acquisition and delisting by Oracle continues to circulate.

The company is currently trading at almost 50% less than the Rs2100 Oracle had to offer to bring its stake from 35% to 81% in December 2006. As its Flexcube solution has dropped to fifth place in the IBS Sales League table, investors will be paying close attention to the firms next quarterly results to see if other areas of the firm's business can deliver growth.

Other companies to see significant rises last week include:

Index comparison

More information on the Finextra50 Financial Technology Index methodology and constituent stocks can be found here.

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