Online lender OnDeck's profit beats on lower costs, shares soar

(Reuters) - Shares of OnDeck Capital Inc ONDK.N soared on Tuesday after the online lender reported better-than-expected quarterly profit as it set aside less money for bad loans, and managed to keep costs lower.

Traders work on the floor of the New York Stock Exchange, (NYSE) in New York, U.S., December 1, 2017. REUTERS/Brendan McDermid

OnDeck shares were up 12.7 percent at $5.05 in midmorning trade on the New York Stock Exchange.

Like some of its peers, the New York-based company has been struggling with rising loan defaults, and has faced concerns from investors over the quality of its loans and the ability to grow at a fast pace.

The company, which posted losses in the first three quarters of 2017, has been trying to counter some of the damage to its results from delinquencies by trying to attract borrowers with better credit scores and keeping a tight leash on expenses.

OnDeck said on Tuesday it had set aside $34.4 million as provisions for bad loans in the fourth quarter, down 38.2 percent from a year earlier. Total operating expenses fell 28.2 percent to $37.7 million.

Net revenue more than doubled to $42.1 million.

“The initiatives we have implemented to attract higher high-quality borrowers and grow profitably have been working,” Chief Executive Officer Noah Breslow said on a call with analysts.

Net income attributable to common shareholders was $5.1 million, or 7 cents per share, in the quarter ended Dec. 31, compared with a loss of $35.9 million, or 50 cents per share, a year earlier. (

On an adjusted basis, OnDeck earned 10 cents per share. Analysts on average had expected a profit of 4 cents per share, according to Thomson Reuters I/B/E/S.

OnDeck lends money to small businesses through its online platform and sells the loans to institutional investors. It also partners with banks looking to lend to small businesses online.

Breslow said the company expects to accelerate the growth in number of loans it originates next year and is planning to invest an additional $5 million in its technology.

“Looking ahead to 2018, we expect to drive double-digit loan growth due to strong customer demand, our disciplined risk management and our focus on scaling responsibly,” he said.

The company said it expects first-quarter revenue to be between $86 million and $90 million and full-year revenue of between $370 million and $382 million, falling short of expectations. Analysts had predicted a quarterly revenue of $91.3 million and full-year revenue of $390.4 million, according to Thomson Reuters I/B/E/S

Reporting by Anna Irrera in New York and Aparajita Saxena in Bengaluru; Editing by Savio D’Souza, Maju Samuel and Jonathan Oatis