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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.
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Lending Briefing: Digital lending profitability and underwriting discipline

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. 

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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