SoFi Earnings: Deposit Growth Drives Net Interest Income Higher, but Growth Slows Sequentially

SoFi Stock at a Glance

• Fair Value Estimate: $14
• Morningstar Rating: 5 stars
• Morningstar Economic Moat Rating: None
• Morningstar Uncertainty Rating: High

No-moat-rated SoFi Technologies SOFI reported solid first-quarter earnings as the firm’s impressive deposit growth and rising interest rates drove strong net interest income, though firmwide sequential revenue growth did slow meaningfully. Net revenue increased 43% year over year and 3.4% sequentially to $472 million. Revenue growth continues to outpace expenses, and the firm’s net loss per share narrowed to $0.05 from $0.14 last year, giving more credence to SoFi’s guidance for GAAP profitability by the end of 2023. As we incorporate these results, we are maintaining our $14 per share fair value estimate.

SoFi’s lending segment, which is the firm’s largest source of revenue, grew 33% from last year and 2.7% sequentially to $337 million. Growth was entirely due to net interest income, which increased 113% from last year to $201 million, while noninterest income was down 14%. SoFi’s net interest income continues to benefit from its success in attracting deposits, which increased 37% from last quarter to $10.1 billion. The larger deposit base has allowed SoFi to expand its balance sheet, with the company’s loan book increasing 123% year over year and 17% sequentially to $16.2 billion. Its net interest margin also expanded 110 basis points to 5.5%.

Meanwhile, loan origination continues to face head winds, with total origination up just 7% from last year, although personal loans remain a strong area for SoFi, with total origination of $2.95 billion up 46% from last year and 19.4% from last quarter. Student loans are still being affected by both continued student loan forbearance and higher interest rates, with origination volume down 47% from last year. Mortgage volume was also down 71% due to higher interest rates and issues with SoFi’s fulfillment process. The firm’s recent acquisition of Wyndham Capital will likely help resolve its loan processing issues, but higher interest rates will be a headwind for student loan and mortgage volume for the foreseeable future.