SoFi Technologies anticipates this fall's resumption of federal student loan payments will boost the company's already booming loan business.
The San Francisco company made about $3.7 billion of personal loans during the second quarter, vastly beating analyst expectations and up 51% from $2.5 billion a year earlier. Its student loan business continued to underperform, but CEO Anthony Noto said that trend should change as the federal student loan payment moratorium comes to an end in October.
"For the first time in three years, we have clarity for the business as we look toward the latter half of this year," Noto said on the company's earnings call on Monday.
SoFi has long focused on refinancing student loans, a business that became far less lucrative when the federal government paused federal student loan payments during the pandemic. The moratorium, which SoFi
The company expects student loan originations to rebound when the moratorium ends, though executives said they don't expect activity to return to pre-COVID levels this year. Interest rates are now at a 22-year high, a factor that
Still, Noto said there are reasons beyond interest rates for borrowers to refinance. Some may want to refinance to lower their monthly payments, which would give them "a little bit of cushion" as they wait for rates to come down to refinance again, Noto said.
The outlook for the next several months is somewhat hazy, Noto said. But the long-term opportunity is clear given that 40 million Americans still have federal student loans — and SoFi has refinanced less than 1 million in its history.
"I think it's an exciting opportunity, and we're glad to be back in the business," Noto said.
The SoFi CEO said he's "really happy for the American people" that the administration has given more clarity on what happens to student loan payments so that "families can plan accordingly."
"It is going to be a huge burden for many of them," Noto said. "And the more they know, the better they can plan for the future, and we're here to help them in any way that we can."
The company's stock, which has fallen sharply from its 2021 peak, closed up 19.9% to $11.45 per share.
The resumption of the student loan business — where originations fell 1% compared to last year — helped SoFi bump up its revenue outlook for the fiscal year. The company now expects adjusted net revenues to grow by 28% to 32% this year, up from its original guidance of 25% to 30%.
The company is "well on track" for achieving profitability by the end of the year, Noto said. The company has consistently been reporting losses since going public in 2021. However, net losses fell to $47.5 million during the quarter, down from nearly $96 million a year earlier.
The company's earnings results "were strong, especially considering interest rate and policy headwinds that SoFi continues to execute around," Jefferies analyst John Hecht wrote in a research note.
The brightening prospects of the company's Financial Services division — which includes its investment platform, credit card and lending-as-a-service arm — are central to the profit outlook. The segment produced a roughly $4.4 million loss during the quarter, down sharply from $53.7 million a year earlier, as net interest income on loans grew faster than expenses.
