SoFi Technologies (SOFI.O) reported a significant rise in fourth-quarter profit, driven by robust loan demand and rapid growth in its fee-based business segments. Shares of SoFi jumped 5.7% in premarket trading following the announcement. SoFi, originally founded in 2011 as a student loan refinancing provider, has since expanded its services to include personal loans, mortgages, investing, and payments, specifically targeting tech-savvy, younger customers. The company aims to provide faster, app-based financial services compared to traditional banks.
The company’s financial services business, encompassing credit cards and investing products, experienced substantial growth, with revenue surging 78% to $456.7 million for the quarter ending December 31. Total loan originations reached a record $10.5 billion, marking a 46% increase year-over-year, fuelled by strong demand for personal, student, and home loans. CEO Anthony Noto highlighted the robust credit performance, which aligned with the company’s expectations, and noted that the overall financial health of its members remained strong across various spending, investing, and credit activities.
Fee-based businesses have proven beneficial, helping to insulate fintech companies like SoFi from interest-rate fluctuations. Revenue from this segment surged 53% compared to the previous year. Addressing concerns regarding potential regulatory changes, CEO Noto commented on the potential impact of a proposed 10% cap on credit card interest rates, suggesting it could lead to a meaningful contraction in credit card lending and create a gap in the market, potentially opening opportunities for personal loans offered by fintech companies.
SoFi’s fourth-quarter adjusted revenue jumped 37% to a record $1 billion from the previous year, and its adjusted profit more than doubled to 13 cents per share from 5 cents. These results reflect the company’s ability to attract and retain customers through its diversified range of financial products and services.
