SoFi has $5 billion in customer deposits less than a year after the fintech lender acquired the banking charter required to directly hold customer cash.
The news came from a third-quarter earnings report that shot SoFi's share price up by more than 10% Tuesday morning before falling back to a 6% gain later in the day. The San Francisco company's quarterly loss of $0.09 per share and $419 million in revenue for the quarter were both better than analyst expectations.
SoFi in February closed on a deal to acquire Golden Pacific Bancorp., an OCC-chartered bank. The charter allows SoFi to directly hold deposits and lend against them.
The $5 billion in deposits this quarter represents an 86% jump from just three months ago. CEO Anthony Noto said on Tuesday's earnings call that the company is winning customers from big banks.
"The vast, vast majority of what we're seeing is coming from the largest banks in the United States, and we're winning deposit share from them," Noto said. "We do watch the deposit trends more broadly in industry and it's clear that not only are the large banks losing deposits to digital companies like SoFi, fintech companies like SoFi, but they are also losing it to money-market funds."
It helps to offer more money back. For much of the last quarter, SoFi offered more than 2% annual percentage yield on its savings and checking accounts. Its savings account later this week will begin offering 3% APY, compared to a 0.16% national average, according to Bankrate.
LendingClub, another fintech lender that acquired a banking charter, last week reported total deposits of $5.1 billion, up 80% from last year. The company's high-yield savings account recently began advertising an APY of 3.12%.
Online-only banks have been offering significantly higher rates on deposits for savings and other accounts since the Federal Reserve began raising interest rates earlier this year. But it was unclear how much that would drive customers to upstart banks. For perspective, the largest U.S. consumer banks measure their deposits by the trillion.
But winning even a slim fraction of those deposits offers a boost to SoFi's lending business. The banking charter allows SoFi to use the deposits to fund its loans, whereas non-bank lenders typically connect borrowers to banking partners or fund loans through institutional investors.
That model — often called marketplace lending — has come under pressure from rising interest rates.
"By using our deposits to fund loans, we benefit from a lower cost of funding for loans, and that's more profit per loan," Noto said.
SoFi originated about $3.5 billion in loans from July through September, up 2% from the same period last year. A 71% jump in personal loans (which represented the majority of SoFi's lending for the period at $2.8 billion) offset declines in home loans and student loans.
The total revenue from SoFi's lending operations was $301 million, up 43% from a year earlier.
At $5.77 late in the trading day, SoFi's share price is up about 12% in the past 30 days. But it is still climbing out of a hole dug during the broader fintech selloff to start the year, down more than 60% year-to-date. The company's share price peaked at about $25 in January 2021.
Climate TRACE's data show emissions at the facility-level.Image: Climate TRACE