Lending Briefing: Digital lending profitability and underwriting discipline
- Quite a few digital lenders beat market expectations in Q1 2022, posting very strong revenue growth as they continue to expand in new pockets of the market.
- But looking at the stock market performance of digital lenders', stocks are still well in the red, indicating that investors are looking for underwriting profitability.
Small digital lenders grow, but it’s the underwriting that matters
Digital lenders delivered quite a few positive earnings surprises in the first quarter of 2022, as the strong post-pandemic consumer credit health continues to encourage lenders to push for growth.
However, valuations remain under pressure. Stocks are still down year-to-date, indicating that stockholders are still looking for profitability and underwriting discipline.
Here’s a quick Q1 earnings overview of some digital lenders that exceeded market forecasts and reported strong portfolio growth:
Lending Club beat expectations in the first quarter with $40.8 million in net income. New loan originations rose to $3.2 billion from the $2.8 billion reported in the prior quarter. Deposits almost reached $4 billion, a 27% growth on the previous quarter.
Oportun delivered a strong earnings surprise as well, with net revenues of $205 million up 86% year-on-year. First quarter originations grew by 140% year-on-year to $800 million, with new borrowers representing more than half of total loans, up from 40% a year ago.
MoneyLion also beat consensus estimates of $56 million with revenues of nearly $70 million, and just about broke even with a $0.1 million net income for the quarter. On a year-on-year basis, total customers more than doubled to almost 4 million at the end of Q1 2022. Originations rose 116% to $408 million.
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