Student loan rebound lifts SoFi
SoFi (SOFI) reported a student loan-driven windfall in its third quarter results while also raising its full-year guidance on revenue and predicting a quarterly profit before the end of the year.
Its stock closed up 1% after rising more than 14%.
Student loan originations for the San Francisco-based fintech bank doubled in the third quarter compared to a year ago. Some American borrowers started repaying loans in October after a three-year pandemic forbearance pause.
Read more: Can you change your student loan repayment plan?
Deposits at SoFi also doubled from the same period to $15.7 billion, with SoFi CFO Christopher Lapointe also pointing out that its "deposit growth outpaced loan growth for the third consecutive quarter."
By consequence, the firm's net interest income, a key measurement showing the difference firms earn taking in deposits to make loans, more than doubled from the year ago period.
"We saw exactly the trend that we expected in student loans in the quarter, which was a slight bump relative to where we've been in the past," SoFi CEO Anthony Noto told analysts Monday.
The rebound "was actually much faster than we were expecting," Oppenheimer executive director Dominick Gabriele told Yahoo Finance Live.
"A lot of people are extending [their] loan terms to lower those monthly payments, make them more affordable," Gabriele, who has a hold on Sofi, added.
The bank raised its full-year guidance on revenue and its go-to profit measuring stick, adjusted EBITDA, by $71 million and $12 million respectively, more than the firm previously expected.
It still reported a net loss of $277 million, which included a one-time impairment charge of $247 million. Excluding the impairment, SoFi's net loss was $19.5 million, far better than the $61.4 million analysts expected as compiled by Bloomberg.
More than a decade ago, SoFi began as a specialty lender for student loan borrowers in need of refinancing. It has since grown to offer a range of other financial products from other types of consumer loans to investing and retirement savings products.
As of the middle of this year, it was the country’s 90th-largest bank by asset size. As of the end of September SoFi had nearly $30 billion in assets.
While pointing to the firm's deposit growth relative to other lenders, SoFi's Noto acknowledged that the Federal Reserve's current positioning to keep interest rates higher for longer could put pressure on lending over the coming quarters.
"Higher for longer could put pressure on these other financial companies," Noto said. "And in that environment, we would want to be a lot more conservative and actually see something like personal loans not grow very much at all, and student loans grow marginally," he added.
Year to date, SoFi’s stock has risen more than 45%, widely outpacing SPDR's broader select financial sector index fund by 50%.
"We remain concerned about capital constraints and slowing revenue growth in 2024 as the company approaches balance sheet capacity over the next couple quarters," David Chiaverini, an analyst with an Underperform rating on SoFi, said in a Monday note.
Correction: A previous version of this article stated that deposits at SoFi in the third quarter increased to $15.7 million when deposits had, in fact, risen to $15.7 billion. We regret the error.
David Hollerith is a senior reporter for Yahoo Finance covering banking and crypto.
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