OnDeck Originations Slide in First Quarter

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OnDeckOnDeck’s originations dipped in the first quarter of this year to $636 million, down from $658 million in the previous quarter.

“We made some adjustments to credit policy mid-quarter to pull back in certain areas and our funding advisor channel volume decreased sequentially as a result,” said OnDeck CEO Noah Breslow.

In other words, OnDeck has tightened its credit box.

“If you tighten [your credit box] and your competitors stay exactly the same, on the margin, your funnel is going to deteriorate a little bit because you’re not making as aggressive offers as you were before,” Breslow said in response to a question on this morning’s earnings call.

But he also said that OnDeck has a lot of historical data on its portfolio that tells them that this tightening for now is a wise decision.

“And we’re not making a seismic shift in who we’re targeting or what we’re trying to do,” Breslow said.

When asked by an analyst on the conference call if competition in the space is now more intense, he agreed that it is.

“But it’s broad based, not localized to any one competitor,” Breslow said. “There are larger players in the market that are getting a little more mature. Some of them are improving their access to capital as well.”

Kabbage likely sees itself as a primary competitor and not just part of “broad based” competition. After all, it originated $2 billion last year, compared to OnDeck’s $2.48 billion.

“The small players actually have pretty good access to capital too,” Breslow said on the call. “So any single one of them is not that big, but if you put them all together, they’re equivalently sized to another OnDeck. So that’s something we watch as well.”

While total originations dropped for OnDeck, Breslow said that the company’s line of credit volume was at an all time high, accounting for $150 million. Also, 43% of volume for the first quarter of 2019 came from OnDeck’s direct channel. Yet the company continues to build out its partnerships.

“Given the attractive customer acquisition costs in the strategic partner channel…adding new partnerships remains a focus,” Breslow said.

Breslow said OnDeck expects to return to quarterly growth in the second half of this year.

Last modified: May 2, 2019
Todd Stone

Category: Business Lending

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