OnDeck Capital reported record profits in the fourth quarter thanks to surging loan demand, but the online business lender is warning investors that the pace of growth could slow in 2019.
The New York company said Tuesday that it earned $14 million in the fourth quarter, up 175% from the same period in 2017, as total loans increased 23%, to $1.17 billion. Its earnings per share of 18 cents beat by two cents the mean estimate of analysts polled by FactSet Research Systems.
Gross revenue increased by 25% to $109.5 million, largely due to record origination volume, as well as improved loan yields and slightly lower funding costs.
For the full year, OnDeck earned $27.7 million, or 35 cents per share, compared to a loss of $11.5 million in 2017. Revenue increased 14% to $398.4 million.
OnDeck is forecasting revenue growth of between 12% and 17% in 2019 due in part to recent expansion initiatives. The company recently launched a new division that will serve as its platform for providing small-business lending technology to banks, and has struck deal to with PNC Financial Services Group to begin
It also recently announced plans to offer equipment financing to small businesses and is strengthening its international capabilities by merging its Canadian operations with those of rival Evolocity Financial Group, creating what would become Canada's second-largest online business lender.
Still, in a conference call with analysts Tuesday, CEO Noah Breslow suggested that loan growth could slow somewhat due to increased competition and a slight weakening in business confidence. In its 2019 guidance, OnDeck says it expects loan growth to be in the "low double digits."
"The economy continues to grow and small businesses continue to see capital. However, small-business optimism has come off its peak and economists are calling for slightly slower growth in 2019," Breslow said.
OnDeck's shares ticked up after the opening bell Tuesday, but began to slide in midmorning. By midafternoon the shares were down 9%, to $6.70.
