We recently got a look at SoFi Technologies‘ (NASDAQ:SOFI) latest results, and the numbers look pretty impressive. In this Fool Live video clip, recorded on Nov. 15, Fool.com contributor Matt Frankel and Industry Focus host Jason Moser take a closer look at the numbers and what investors should keep an eye on going forward.
Jason Moser: We’ll start with SoFi. It’s been a pretty good year for SoFi. So far, the stock is up, I think 12%, 13%, or something like that, outpacing the market. Still a relatively new issue to the public markets. But I know this is a business that you like. You own shares of it, I believe. Talk to us a little bit about the quarter. What stood out to you that made this a good one for SoFi?
Matt Frankel: What’s funny as you go on in earnings season, the longer it goes the more growthier the companies get. You start out with the big banks that you get into, the regional banks and you to the fintech and you get to the really new fintechs.
Moser: Like a grand finale of a fireworks show. You’re always waiting for that big bang.
Frankel: They save the more exciting ones for last. That’s what we saw here. SoFi the numbers look fantastic. The stock reacted appropriately; 2.9 million members, that’s almost double what it had a year ago, 96% year-over-year growth. It added 377,000 members in the third quarter alone.
If you remember what we said last time we were on the show and talked about SoFi, the key is being able to sell cross-sell products because SoFi’s average member has something like 1.5 products with the company. Like a personal loan and some might have a credit card or something like that. Products grew at 108% year over year. Products are growing faster than the member base, which indicates that they are doing a really good job of cross-selling products.
They announced one real interesting tidbit, most of their growth is being fueled by just a few of their products. They said between SoFi Money, which is their bank account replacement, SoFi Invest, which is their brokerage business, and their new credit card, which is very new and the smallest of those three products I just mentioned, drove 79% of their new membership base between just those three products and 73% of their cross-selling came from those three products. Financial services products, including those three, grew by 179% year over year. The core lending businesses is doing well, they did $3.4 billion in loan volume between home loans, personal loans, and student loans, which remember they started as a student loan refinancing company. The financial services is the big story here.
Moser: It is fascinating to think about how this business has evolved in what seems like a very short amount of time. It’s true financials, a holistic solution, it sounds like it’s really becoming. We talk a lot about the environment for banks. When interest rates start to creep back up and it feels like we are obviously headed in that direction. The pace is yet to be determined. But regardless, we talk about how banks typically should benefit from those rising rates and be able to generate a little bit more on that net interest income line item there. Do you feel like it’s from those same types of tailwinds or is it really all about products for this company?
Frankel: Well, they do. Right now their lending business a big portion of it still. I said $3.4 billion of loan volume. SoFi’s personal loans are typically in the 6% to 10% interest rate range. These are higher-interest loans for the most part. That’s where the biggest part of their lending business is. They do generally benefit when interest rates rise. Not like a one-to-one relationship, like a lot of bank loans. But it’s definitely a big growth driver if interest rates rise.
But right now the big story there is the growth in products. If you’re growing your bank account customers and your investing customers by 180% year-over-year a small interest rate increase is kind of a footnote at that point. But their priority right now is building up the business. Then eventually just sitting and coasting on the interest income and fee income that they are generating. But right now they are all outgrowth mode, so interest rates are more of a secondary concern.
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