SoFi Posts Strong Q3 Earnings as Interest Income and Momentum in Financial Services Drive Results

No-moat SoFi Technologies (SOFI) reported strong third-quarter earnings that came in above our expectations, as its recently acquired bank charter and rising interest rates continue to drive impressive net interest income growth for the company. Net revenue increased 56% from last year and 16.8% sequentially to $424 million. That said, the company remains unprofitable, losing ($0.09) per share compared with ($0.05) last year, which benefited from a $64.4 million fair value adjustment, and ($0.12) last quarter. As we incorporate these results, we do not plan to alter our $15 fair value estimate.

SoFi’s lending business, its largest source of revenue, grew 43% from last year to $301.7 million. Growth mostly came from rising net interest income, which increased 93% year over year and 22.4% sequentially to $139.5 million. The benefit of SoFi’s recently acquired bank charter continues to flow through the company’s results as access to retail deposits allows SoFi to improve its cost of funding and hold the loans it makes for longer before selling them, generating more interest in the process. Once again, SoFi’s deposit growth came in well above our expectations, rising 86% from last quarter to $5 billion. Deposits are now around 50% of SoFi’s total funding structure, and we see SoFi’s success here as a major driving force behind a recent string of strong results for the firm.

SoFi’s loan origination volume was more mixed, with total origination rising 2% from last year and 8.8% sequentially to $3.48 billion. Personal loans remained strong, with origination rising 71% from last year to a record $2.8 billion. This was offset by continued weakness in student loans and mortgage origination, which fell 53% and 73%, respectively, to $457 million and $216 million. Federal student loan forbearance and high mortgage rates remain major headwinds to SoFi’s origination volume.