SoFi’s earnings results showed a growing embrace of the company’s platform approach that brings savings, lending and spending together in a continuum of financial activity.
Earnings presentation materials and results posted Monday (July 31) showed that customers are boosting deposits by double-digit percentages, while lending also was up double digits.
CEO Anthony Noto said on a conference call with analysts that the results came in tandem with successful word of mouth and unaided brand awareness, and “despite market volatility and industry disruption” that he contended reflect the diversification of the company’s business lines.
Investors bid the stock 21% higher in intraday trading.
Deposits swelled by 26% year over year, and $2.6 billion sequentially as the company has increased the rates on those accounts to a recent 4.4% APY to end the second quarter at $12.7 billion. As Noto detailed on the call, 90% of deposits stem from direct deposit activity.
And, as he added later in the call, the company’s banking license is helping to drive positive economics in the lending and financial services businesses. SoFi Money members have increased by 47% year over year to 2.7 million accounts. Members, according to commentary on the call, had a median FICO score of 747 for a direct deposit portfolio — and about 50% of newly funded SoFi Money accounts are setting up direct deposit by day 30.
Average spend per funded account was up 13% quarter over quarter.
During the quarter, the company added 584,000 new members, bringing the roster 44% higher to 6.2 million. Financial services products were up 47% to 7.9 million, and lending products gained 25%. SoFi originated a record $3.7 billion in loans, leaping 51% from the $2.5 billion seen a year ago. Net charge-offs were lower quarter to quarter at 2.9% of student loans. Noto said that the resumption of student loan repayments and the striking down of the current administration’s attempt to extend loan forgiveness represents a significant opportunity for SoFi in terms of refinancing that student debt.
Chief Financial Officer Chris Lapointe said on the call that student loan originations were down 1% year over year and home loans by 27% year over year, “as macro factors continued to provide headwinds to these businesses.”
The company’s tech platform, he added, showed revenues of $88 million, gaining 4% year on year, and up 13% sequentially. The revenue growth was underpinned by Galileo account growth to 129 million, up 11% year over year.
Asked on the conference call about deposits growth and cross-pollination, management said that there’s a comfort level in adding $2 billion of deposits on a quarterly basis as the company continues to add members to its SoFi Money roster.
As Noto said during the call, “if we have a primary relationship with the SoFi Money member, and we have their direct deposit, we see what bills they’re paying, we see what loans they’re paying, we see if they have excess cash that should be invested in vehicles outside of just yielding on the savings account … that primary relationship gives us really great data about their mortgage, about student loans, about budgeting.”