Klarna Announces IPO and Partnership with Walmart
068 - Industry Insight IB (FIG)
Financials Sector Rebounded This Week
Over the past seven trading days, the financial institutions and services sector experienced a rebound from the previous week. The S&P 500 Financials Index is up 1.98% over this period, outperforming the broader market, as the S&P 500 declined by 0.18%. Key financial stocks also saw gains, with JP Morgan, Capital One, and Bank of America rising 2.54%, 2.04%, and 5.05%, respectively.
Various macroeconomic and sector-specific factors contributed to this rebound. The reduced risk of a government shutdown helped stabilize investor sentiment and decrease political uncertainty, creating a more favorable environment for financial stocks. Additionally, investors sought undervalued stocks following market declines over the past two weeks, leading to increased buying activity. With the S&P 500 entering correction territory, investors have turned to stocks that fell significantly, contributing to the market's rebound. Positive movements in global markets, including European and Asian indices, also boosted sentiment and helped drive financial stocks higher.
Klarna Announces IPO and Partnership with Walmart
On March 14th, Swedish fintech company Klarna announced its plans to go public in the U.S. The popular "buy now, pay later" platform reported strong revenue growth in 2024, with a 24% increase to $2.81 billion and a net profit of $21 million, a significant turnaround from a $244 million net loss the previous year. Klarna’s expected valuation is between $15 billion and $20 billion, though the exact offering size and price range have not yet been determined.
Despite the challenging IPO market, Klarna is moving forward with its public offering because it believes it has achieved the necessary profitability and growth momentum. The company sees its valuation rebounding and views the IPO as an opportunity to expand into a broader financial platform. Additionally, Klarna anticipates benefiting from a potentially more favorable regulatory environment.
At the same time, Klarna secured an exclusive partnership with Walmart to provide buy now, pay later services through OnePay, Walmart’s consumer finance app. Klarna will replace Affirm as Walmart’s BNPL provider, with full integration expected by the end of 2025. This partnership expands Klarna’s U.S. market presence and provides access to Walmart’s extensive customer base, giving it a competitive advantage over Affirm and reinforcing its potential to secure additional major retail partnerships. These developments position Klarna for continued growth throughout 2025.
First Commonwealth Financial Corporation Receives Regulatory Approval for Acquisition of CenterGroup Financial
On March 18th, 2025, First Commonwealth Financial Corporation received regulatory approval to acquire CenterGroup Financial, the parent company of CenterBank, a community bank in Cincinnati. First Commonwealth, a regional bank operating in Pennsylvania and Ohio, expects to close the merger in Q2 2025. The all-stock transaction is valued at $54.6 million, with CenterGroup shareholders receiving a fixed exchange ratio of 6.10 shares of First Commonwealth common stock for each CenterGroup common share.
This merger will add approximately $348.4 million in total assets to First Commonwealth’s operations and is expected to be accretive to earnings, contributing an estimated 2% in 2025 and 3% in 2026. The acquisition also expands First Commonwealth’s footprint into the Greater Cincinnati market, strengthening its regional presence and enhancing its banking operations.
Buyer and Seller
First Commonwealth Financial Corporation: The acquiring company, a regional bank with a $1.6 billion market cap, operating 125 community banking offices across Pennsylvania and Ohio. It offers services including commercial and consumer banking, mortgage lending, equipment finance, wealth management, and insurance.
CenterGroup Financial: The acquired company, the parent of CenterBank, a community bank in Greater Cincinnati. It provides deposit accounts, residential mortgages, and full-service banking to owner-managed businesses.
Financial Advisors
Raymond James & Associates: Founded in 1962, Raymond James is one of the largest U.S. financial services firms, specializing in private client services, capital markets, asset management, and banking. Notable deals include Ring Energy’s acquisition of assets from Stronghold Energy II Operating LLC.
Janney Montgomery Scott: Founded in 1832, Janney Montgomery is one of the oldest financial services firms in the U.S., offering portfolio management, financial planning, investment advisory, and wealth management services. It recently acquired TM Capital, a middle-market investment bank.
Impact on Investment Banking
This merger highlights key trends in the banking industry, where consolidation is increasingly used to achieve scale and enhance competitiveness. The transaction may encourage further acquisitions among regional banks in Pennsylvania and Ohio. Additionally, the deal underscores the role of investment banks in navigating complex regulatory environments and structuring strategic transactions. This transaction could spur additional M&A activity among regional banks, creating more deal opportunities for investment banks.
