Upstart Personal Loans Leap 89% Year Over Year

Upstart’s latest quarterly results showed double-digit gains in loan originations, powered by artificial intelligence (AI) and automation, where management also said that the credit quality of its lending portfolio was strong amid new capital commitments from its lending partners.

The earnings materials indicate that during the quarter, the company originated more than 243,000 personal loans, which was 89% higher than a year ago and up 30% sequentially. The transaction dollars in the quarter came to $2 billion, up 65% from the year ago levels.  

The more than 1,700 auto loans were up 216% from last year.  

Consolidated revenues were $219 million, which was 24% higher than last year.   Management’s guidance of $200 million for the current quarter revenues sent the stock up 20% in after hours trading on Tuesday (Feb. 11). The company also noted that 91% of its loans were fully automated. The materials also detailed that during the quarter it had $1.3 billion in new commitments from existing capital partners. 

During the conference call with analysts, CEO Dave Girouard said home equity line of credit (HELOC) loans grew by about 60% sequentially “and our small dollar relief product growing a stunning 115% quarter on quarter.” He noted that new iterations of its models helped refine and drive originations, and said, “We’re increasingly focused on auto refinance as an excellent cross-sell opportunity for our millions of prior borrowers.” 

Later in the call he said, “The demand for HELOCs from our lending partners is substantial because it’s very prime and it’s a product with which they’re both familiar and comfortable. Banks and credit unions also love homeowners as customers. So it’s quite likely our funding supply for HELOC will exceed our needs for some time to come. I expect 2025 will be a great year for home lending.”

The data-rich, automated and personalized lending processes, the CEO said, are also improving recovery of delinquencies.

“In Q4, we increased the rate at which a delinquent borrower makes a payment within 14 days of contact by 25% sequentially. By personalizing our outreach timing and methods. This demonstrates how personalization helps borrowers stay on track and improves overall portfolio health,” Girouard said.

As Girouard said later in the call, “more accurate models lead to growth. … When the level of automation goes up, meaning there’s less friction involved in getting a loan from us invariably, the conversion rate goes up.”

Fourth quarter originations with Upstart’s lending partners grew 30% quarter over quarter and 76% year over year, he told analysts.

CFO Sanjay Datta said that the average loan size of approximately $8,580 was up from $8,400 in the prior quarter, “reflecting continued model improvements that allowed us to approve higher loan amounts.” 

There was also a tailwind to lowering APRs, the Fed’s rate cuts from last Fall, where, as the CFO said, “we’ve always talked about them having some delay in how they work into our platform pricing, but some of that is being reflected now as well. So some combination of better technology a little moderation in default rates and some rate cuts from last fall all conspired to lower APRs on the platform.”

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