EverBank Financial Corporation (NYSE: EVER) has been on my radar for quite some time. The product that originally drew me to this bank was their CDs. Most banks offer CDs, but with the recent recession the rates have continually slid downhill. What makes EverBank so special is that they offer foreign currency CDs. Depending on the currency this allows them to offer much better rates than most U.S.-denominated CDs. For example, their Brazilian real CD currently provides an APY of 4%, while the Indian rupee and South African rand each come in at 3.5%. One would be hard-pressed to find a better rate than those in U.S. Currency CDs. This is what sets EverBank apart from the rest. However, as with any higher return there is always associated a higher risk. And, of course, there is the factor of the exchange rate. Since the interest rate is factored in the foreign currency, one would need to convert any interest earned back into USD. So exchange rate fluctuation does make this product a risky investment vehicle. However, if timed right the return could be worthwhile.
However, the fact that they are strictly an online institution with no brick-and-mortar locations might make it difficult to bring in basic banking customers. Though online banking is growing in popularity, most people still prefer to have the option of talking to an actual person face-to-face if need be. It provides the individual with some level of comfort. Capital One Financial Corporation's (NYSE: COF) recently acquired online bank ING Direct has struggled with this problem. ING has tried to sway possible clients and maintain a physical presence through its cafes. Though the cafes are not actual bank branches they provide the company with an appearance lending to credibility. At the cafes, ING provides workshops and seminars on personal finance. They have created a community atmosphere where one can grab a cup of coffee and ask questions. In this it almost feels more like social media than banking.
ING did add about $80 billion in deposits to Capital One's assets, around 4 times that of EverBank's assets and deposits combined. General Motors' (NYSE: GM) Ally Financial is another popular online bank. Ally also holds several billion in deposits. However, one thing that keeps Ally separate from ING or EverBank is its connection to GM. As such, their auto financing division is a large part of the operation. Ally is the preferred lender for all of GM's vehicle lineup. The actual banking part is really just an extension of the other, more profitable business.
Though Ally Financial, ING Direct, and EverBank are all well-known in the online banking industry, each has their unique qualities. Ally Financial makes strong use of its ties to GM to bring in a lot of auto financing. ING Direct has tried to make banking social through the use of its cafes. Then there is EverBank. EverBank, unlike the others, has no ties to another company or organization. They stand alone as a singular entity. So they are more focused on their actual banking products and providing exceptional service and value to their customers.
EverBank is still new to investors, having only been listed on the NYSE since May 3rd of this year. Since its inception the stock has mostly hovered. Of course, as we all know, the May IPO headlines were all about Facebook. Some great IPOs were not quite given the fanfare deserved, such as EverBank. However, it is for this reason that the stock is currently undervalued. The potential for this bank to grow is still great. The value of its products is unmatched in the online banking industry. For those reasons EverBank would be a great long-term addition to your portfolio. I am excited to see what EverBank has up its sleeves for the future. It is a good, solid product.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.