Upstart to move excess loans off the balance sheet

FinTech lender Upstart said it would not keep loans on its balance sheet that financial institutions have no interest in buying.

As The Wall Street Journal reported Thursday, May 19, the San Mateo, Calif.-based company’s decision reverses its decision earlier this year to keep those loans.

Upstart offers personal loans using a machine learning (ML) based credit scoring model that the company says can identify reliable borrowers with less than stellar credit histories.

Chief Financial Officer Sanjay Datta told the Journal that the company would likely reduce its lending volume if it began to notice weak demand for loans from investors, instead of temporarily placing loans on its balance sheet.

Read more: Upstart, Billtrust, Bill.com drag FinTech IPO index to new lows

The report says Upstart has continued to use its balance sheet to hold loans in new lines of business like auto loans to show investors it can assess credit risk. At the end of March, the company had about $230 million in auto loans on its books.

Upstart is one of a group of several fintech companies whose share price has recently fallen as this year is expected to bring aggressive rate hikes and increased late payments on riskier consumer debt.

Last week, its shares fell 70%, a sharp decline after its December 2020 market debut. The company’s price had soared to $400 per share just seven months ago, but has since fallen in the low $30 range.

Although co-founder and CEO Dave Girouard told analysts earlier this month that the company had just wrapped up its seventh consecutive profitable quarter and fourth consecutive quarter of triple-digit year-on-year revenue growth. Another, the company’s reduced guidance for the current quarter and the whole -year had investors looking to move their money elsewhere.

See also: Upstart reports turbulence for AI-based lending models and low FICO score borrowers

“It has become clear that 2022 is shaping up to be a tough year for the economy and for the financial services sector in particular,” Girouard said, adding how clear it has become that the Federal Reserve will have to act aggressively. to control inflation.

——————————

NEW PYMNTS DATA: THE TRUTH ABOUT BNPL AND STORED CARDS – APRIL 2022

On: Shoppers who have store cards use them for 87% of all eligible purchases – but that doesn’t mean retailers should start buy now, pay later (BNPL) options at checkout. The Truth About BNPL and Store Cards, a collaboration between PYMNTS and PayPal, surveys 2,161 consumers to find out why providing both BNPL and Store Cards is key to helping merchants maximize conversion.