Online lenders fizzle in crisis with On Deck agreeing to sell
On Deck CEO Noah Breslow warned in April that the company could no longer prioritize growing its core business. “Our current focus is to improve cash flow and mitigate risk for our small business customers and for ourselves,” Breslow said on a conference call.
During the financial crisis, banks lacked the firepower to lend and were wary of risk, which paved the way for new entrants. Now the problem is not a lack of money, but of information. It’s hard to predict who will keep their jobs or stay afloat as the pandemic evolves. Even established credit card lenders such as Capital One Financial Corp. admit they don’t know which of their long-time clients still have jobs.
“I don’t think we have a rigorous measure of how many of our current borrowers are unemployed,” Capital One chief executive Richard Fairbank said on a conference call earlier this month. “There are a lot of people who are in varying degrees of unemployment right now, and so even though credit performance is so good right now, what we’re obsessed with is looking beyond that. “
On Deck said its deal with Enova International Inc. was its best option to deal with the new environment.
“Joining forces with Enova, a highly respected and well-capitalized leader in online lending, and leveraging our combined scale and strengths provides the best opportunity for our long-term success,” Breslow told analysts. during a conference call on Tuesday.
Shares of New York-based On Deck, which is down nearly 80% this year through Tuesday, jumped 61% at 9:45 a.m. in New York.
The pandemic hasn’t been the only problem for On Deck. Its shares tumbled last year after JPMorgan Chase & Co., the nation’s largest lender, decided to stop using On Deck’s technology to create online small business loans.
For more items like this, visit us at bloomberg.com