The marketplace lender OnDeck Capital is sticking with its lend-and-hold strategy even though the practice contributed to a second consecutive quarterly loss.
Chief Executive Noah Breslow said keeping a large chunk of loans on balance sheet instead of selling them has cost OnDeck some short-term revenue but will pay off in the long run.
"We believe that retaining a greater percentage of loans on our balance sheet is the right decision for the long-term economics of the business," Breslow said in a news release Monday.
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The scandal-plagued marketplace lender is set to report earnings Monday, and the results aren't likely to be pretty. The big question going forward is how quickly can it reverse the damage and win back the trust of investors.
August 5 -
Some buyers are hanging in there, but as OnDeck Capital's disappointing first-quarter results show, investors who acquire and securitize marketplace loans are heading for hills. Among the reasons: fear of defaults, unfavorable pricing and shrinking loan yields.
May 3 -
OnDeck Capital reported a quarterly loss of $12.6 million as revenues fell short of expectations. At the same time, the New York firm sharply reduced its earnings projection for the rest of the year.
May 2
OnDeck reported a net loss for the second quarter of $17.9 million compared with a $5 million profit in the year-earlier period. It had a loss of $12.3 million in the first quarter.
The company's shares fell 1.7% to $5.16 on Monday; its second-quarter results were announced after the market closed, and the stock held steady in after-hours trading.
Loan originations rose 41% to $590 million. The effective interest yield on its loans fell to 33.3% from 35.9%. The percentage of loans at least 15 days late improved to 5.3% from 8%.
Loans under management rose 47% to $1.01 billion. Gross revenue rose 10% to $69.5 million. Net revenue, which backs out the loan-loss provision and funding costs, fell 33% to $28.9 million. Operating expenses rose 24% to $47.5 million.
OnDeck's results coincide with investor worries about worsening credit quality and shrinking yields at marketplace lenders. Lending Club on Monday
