OnDeck raises earnings guidance following strong 3Q

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OnDeck Capital raised its earnings guidance for 2019 on Thursday after higher margins helped drive a sixth consecutive quarter of profits.

The New York-based online lender said that it expects to collect net income this year of $21 million to $25 million. That range was above than the company’s previous guidance of $12 million to $20 million.

The stock market responded positively, as the company’s shares were up 15% in midday trading Thursday.

OnDeck specializes in high-priced loans to small businesses that generally cannot qualify for less expensive credit from banks. The publicly traded company recorded $94.5 million in losses in 2016 and 2017, but has since cut costs in an effort to become profitable.

During the third quarter, OnDeck recorded net income of $8.7 million, which was down from $9.6 million in the same period a year earlier. Loan originations were down by 3% year over but up more than 6% from the second quarter to $629.3 million.

The results were also aided by higher yields on its loans. Its net interest margin climbed 70 basis points year over year and 20 basis points from the prior quarter, to 29.2%.

OnDeck’s credit quality metrics were weaker than a year ago. The net charge-off rate, which was at 11.1% in the third quarter of last year, rose to 13.7%. Some 8.5% of the company’s loans were at least 15 days late, which was up from 6.4%.

During OnDeck’s earnings call, Noah Breslow, its CEO, said that revenues collected by the U.S. small-business customers have grown at a slower rate in 2019 than they did the previous year.

He noted that trade disputes have served as a drag on some industries and suggested that the revenue slowdown is likely to continue in 2020.

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Small business lending Marketplace lending Credit quality Earnings OnDeck Capital