What happened
Shares of SoFi Technologies (SOFI 3.69%) leaped 12.5% on Monday after the financial services provider said it was on track to achieve profitability later this year.
So what
SoFi's net revenue rocketed 60% year over year to $457 million in the fourth quarter. The fintech company offers relatively high interest rates for its popular checking and savings accounts. That's helping it attract new members and rapidly grow its deposit base.
SoFi added nearly 480,000 new members during Q4. It ended 2022 with more than 5.2 million total members, representing growth of 51%.
Meanwhile, total deposits at SoFi Bank rose by 46% sequentially to $7.3 billion. Better still, these funds are likely to be sticky, with 88% of the deposits in the company's checking, saving, and cash management accounts coming from members who use direct deposit.
"As a result of this growth in high-quality deposits, we are benefiting from a lower cost of funding for our loans," CEO Anthony Noto said in a press release. "Our deposit funding also increases our flexibility to capture additional net interest margin (NIM) and optimize returns, a critical advantage in light of notable macroeconomic uncertainty."
Noto went on to state that SoFi Bank produced net income of roughly $30 million during the quarter. That helped the company's overall net loss narrow to $40 million from $111 million in the year-ago quarter. SoFi's adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) improved by 58% to $70 million.
Now what
Noto expects these encouraging trends to persist in the coming quarters:
Our continued strong growth and significant improvement in GAAP net income margin position us very well in 2023 for another year of significant revenue and EBITDA growth and for reaching GAAP net income profitability in the fourth quarter.
