U.S. Markets

Online lender OnDeck beats profit estimates, shares surge

(Reuters) - OnDeck Capital Inc ONDK.N, which lends to small businesses online, reported a third-quarter profit that beat estimates and raised its full-year outlook, sending its shares surging nearly 26 percent.

The company expects a full-year 2018 profit of $20 million to $24 million, up from its previous outlook of $10 million to $16 million.

Loan originations jumped 22 percent to an all-time high of $647.8 million from $530.9 million, the New York-based lender said.

Excluding one-time items, the company earned 17 cents per share in the third quarter, beating the average analyst estimate of 11 cents, according to IBES data from Refinitiv.

Over the past year OnDeck has overhauled its business by tightening credit requirements and slashing costs to address concerns over its ability to grow while keeping the loan quality in check.

“We had an exceptional third quarter,” Chief Executive Officer Noah Breslow said on a conference call with analysts. “We delivered record profits, business momentum is strong, and we’re making good progress in our strategic growth initiatives.”

Gross revenue was $103 million, up 23 percent from the year-ago quarter. Interest income soared 24.2 percent to $99.5 million, boosted by the U.S. Federal Reserve’s hiking interest rates.

Like other online lenders, OnDeck sells its loans to other financial institutions, such as banks.

Last month it set up a subsidiary called ODX to partner with banks looking to provide small business online lending.

Shortly afterward, it announced a partnership with PNC Financial Services Group Inc's PNC.N PNC Bank using OnDeck's technology to provide lines of credit of up to $100,000 to small businesses through its website.

The partnership is expected to begin in 2019, and follows a similar deal with JPMorgan Chase & Co JPM.N signed in 2015.

OnDeck has a strong pipeline of other bank potential partners, Breslow said on the call.

“We’re seeing interest both in the U.S., and around the world,” Breslow said.

The company forecast gross revenue of $392 million and $396 million for the full year, from $380 million to $386 million forecast earlier.

Net income attributable to common shareholders was $9.8 million, or 12 cents per share, in the quarter, versus a loss of $4.1 million, or 6 cents, a year earlier. (

Net revenue rose 60 percent to $52.2 million.

OnDeck shares were up 25.9 percent at $8.46.

Reporting by Anna Irrera in New York and Bharath Manjesh in Bengaluru; Editing by Shailesh Kuber and Jeffrey Benkoe