Claims Made Against BofI Last Week Were Rehash Of Old Allegations

The New York Post carried an article about the Fed’s probe into possible money laundering at BofI Holding, Inc. (NASDAQ: BOFI). The article was a “rehash of old allegations previously made in the 2015 former employee lawsuit,” DA Davidson’s Gary P. Tenner said in a report. He added that the article “does not change our view of the company.”

Tenner maintains a Buy rating on BofI, with a price target of $34.

A Mere Rehash

“Allegations around third-party check deposits by the CEO, incorrect call reports, and the CEO's brother's checking account have been made before and we believe have been vetted by the OCC over the course of the two full-scope regulatory exams, two mid-cycle exams, and multiple Federal Reserve regulatory examinations,” the analyst wrote.

BofI had hired a law firm to investigate the claims. There have been no regulatory enforcement actions so far. Moreover, the company has executed two M&A transactions since mid-2015, Tenner noted. Bofl had also stated that the allegations made by a Department of Justice AML investigation were inaccurate.

The stock represents an “attractive long-term investment” and has upside, given the company’s “strong balance sheet trends, high level of profitability, and the eventual resolution of litigation, which we expect to be a catalyst for a reduction in the company's outsized short interest,” the analyst stated. He added that the softness in the company’s shares present “a buying opportunity.”

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