SoFi's KPIs worth tracking, part 1
KPIs I like watching in SoFi's earnings reports, and ones I recently started
This became much longer than I expected (not finished yet and currently it is at ~1.3k words) so I will cut this off at 3 KPIs and add the remaining 3 KPIs in the next part of this because I am also writing a post on the topic of SBC expenses.
wrote a SeekingAlpha article on SoFi in January this year, touching KPIs (Key Performance Indicators). I recently, some not so recently, started looking at other less obvious KPIs to get a better look into SoFi’s health and progress so I want to touch a few of them while not repeating the ones in that article.SoFi Money
A little background before getting into the numbers, SoFi Money used to be the name of SoFi’s money management product before becoming a bank. That legacy product is still operational but it is impossible to sign up for (as far as I am aware) and it also does not provide any APY to the users that use that. After SoFi completed the acquisition of Golden Pacific Bank in February 2022 they launched a product called “SoFi Checking & Savings”. This product replaced SoFi Money and members were encouraged to upgrade to Checking & Savings, not everyone wanted because there are/ were different perks to SoFi Money that some people didn’t want to give up on.
SoFi decided to keep the “SoFi Money” name as the group name for both their old SoFi Money money management product and their new SoFi Checking & Savings product which they also disclose in their earnings reports.
SoFi Money growth
Now we can get into the actual KPI.
SoFi Money, or rather SoFi Checking & Savings, product is a very important product for SoFi. Those are the actual products that provide the liquidity for SoFi to originate loans. Without those, there is no quick lending growth as the liquidity would be capped by what warehouse loans provide and SoFi’s own capital and without those the NIM (Net Interest Margin) would be a lot lower. Last time the NIM difference was mentioned by Noto was in March 21st this year in a fireside with Bank of America. Noto said the following:
So this means that in Q4 SoFi has made 190 basis points of more profit than they would have using warehouse loans.
After we understand the importance of this product, let’s look at its growth.
So what we are seeing in both images? First of all, we are noticing a QoQ growth speed up in the last 2 quarters after it dropped in Q3 2022. We are seeing the growth at one of the highest levels in SoFi’s reported history (at least in values I could find), in fact Q1 2023 was the 3rd highest quarterly growth in SoFi Money in the last 11 quarters. We are also seeing, contrary to both last years, Q1 having higher QoQ growth than Q4 of the year before. I believe that these growth rates will only speed up moving forward since SoFi kept raising rates twice in Q2 as well, on top of raising in March 16th (lower impact on Q1 seeing as it is only 2 weeks in Q1).
Now on top of that, remember that SoFi will be able to keep the APY higher for longer after the fed starts cutting rates, this means that while other banks cut their rates, SoFi will look more attractive and as such gain higher growth again.
Ratio of new SoFi Money of new FS products
It is somewhat a continuation of the previous KPI, but this is more about ratios than pure QoQ or YoY growth. Out of all FS products, the most important one is SoFi Money so we want to see it be a decent portion of total products and especially of growth. In the table below, the black rectangle is when SoFi Money didn’t exist yet, the gray ones are for data I don’t have. It is natural that the percentage of Money products out of total products will go down, SoFi Money is just one product type out of 6 types of Financial Services products. That is why it is interesting when that percentage actually increases (“Money to products” column), such as Q3 and Q4 2020, Q3 2021 and Q1 2023.
The other two ratios are ratios of growth, how many new Money products were there out of total new products. It can be a measure of attractiveness of the Money products. You can see at the YoY growth ratio the increase in the ratio in Q1 and Q2 2022. SoFi just happen to offer a lot higher APY back then compared to competition. In Q1 2023 maybe it was fueled by the issue with regional banks or just the high APY compared to big banks.
An important note to remember about products, they get recorded once regardless if a member signed up 3 years ago and never used it again until today, this means that new “active” products every quarter might be even higher than the new products.
Credit card weighted average FICO
SoFi doesn’t disclose the weighted average FICO for their CC product, and it makes sense. It isn’t exciting, it isn’t in the middle high FICO range between 700 and 800 like personal loans and student loans, but nonetheless, it is important.
Why is it important?
Delinquency rates on CCs are always a lot higher than other loans, the higher the FICO the safer they are.
SoFi aims to push more into CCs. SoFi launched SoFi Travel recently and that has a higher cash back bonus if bought using SoFi’s CC. Anthony Noto has recently also mentioned planning to release more CC products.
In credit card we have one product. We’d love to have a portfolio of four products.
SoFi has been increasing the CC capacity for quite a few members, even without being asked specifically, something that they didn’t do before.
You might notice the discrepancy between the two Q4 2022. The reason for it is because SoFi began reporting using more FICO ranges so it improves the accuracy. Other than that, you might notice the 27% drop in Q1 2022, when SoFi received the bank charter. It is not because the bank had CC loans outstanding already, the bank had 0 CC loans in Q4 2021 before SoFi acquired it, the bank also had 0 CC loans in Q1 as well. I believe the reason for the drop in weighted average FICO is the CRA (Community Reinvestment Act) that “forces” SoFi to cater for lower FICO within the community they operate in1. Since then SoFi managed to stabilize the weighted average FICO and even increase it in the last 2 quarters (increase or decrease is basically closer to the higher limit of that range or closer to the lower one).
This trend is worth watching, especially when you consider that SoFi encourages to consolidate CC debt into personal loans, so 680+ FICO would have a chance to turn this CC debt into a personal loan (could also be denied even if they have above 680 based on other criteria SoFi uses which result in 70% rejection).
Disclaimer:
I have a position in SoFi and as such I could be missing other important KPIs that might be negative or miss a different perspective of the same KPIs that might be negative.
Do your own due diligence, anyone can be wrong, I just try to provide information with as much sources so that people reading can draw their own conclusions.
As always, feel free to comment if you do not agree or didn’t understand something and want clarification.
You must but a lot of time into data collection. It's quite amazing; thank you for sharing. I'm looking forward to the SBC piece. I didn't realize it used to be so high (>25% think), as I learned just recently. I wonder how they compared to other start-ups.