SoFi Earnings: Deposit Growth and Personal Loan Originations Drive a Strong Quarter

SoFi Technologies Stock at a Glance

• Fair Value Estimate: $14.50
• Morningstar Rating: 4 stars
• Morningstar Uncertainty Rating: High
• Morningstar Economic Moat Rating: None

SoFi Technologies Earnings Update

SoFi Technologies SOFI reported strong second-quarter results as it enjoyed strong deposit growth and personal loan originations. Net revenue increased 37% from last year to $498 million, and increased revenue against fixed costs led to better margins, with net loss improving to $47.5 million from $95.8 million last year. As we incorporate these results, we are increasing our fair value estimate to $14.50 per share from $14. Roughly half of that increase reflects the time value of money since our last update, while the remainder is due to lower near-term expense growth projections, as we now expect SoFi to be profitable during 2024.

Despite increasing competition, SoFi continues to see impressive momentum in its efforts to gather deposits, which increased 73.6% from last year to $12.74 billion. Since SoFi obtained a bank charter, its rapidly expanding deposit base has been a major driver of growth, as that enables the firm to dramatically expand its loan portfolio while also improving its funding structure.

Revenue from the lending arm, SoFi’s largest segment, increased 29% from last year to $331 million. Growth was entirely due to net interest income, which increased 103% from last year to $231.9 million, while noninterest income was down 30%. Loan growth was the primary driver, with SoFi’s larger deposit base allowing it to expand its loan portfolio by 119% from last year to $18.2 billion.

Despite lingering headwinds, SoFi had a strong quarter for originations, with total originations up 37% from last year to just under $4.4 billion. Once again, personal loans were the bright spot, with total originations up 51% from last year to $3.7 billion. Student loan originations were effectively flat at $395 million. With student loan forbearance coming to an end, we expect SoFi’s student loan originations to improve, although higher rates mean they are unlikely to return to 2019 levels any time soon.