Institutional sales on the OnDeck marketplace platform are spiraling upwards.
OnDeck rolled out a whole loan marketplace as a compliment to its balance sheet capacity in late 2013. The move was designed to sate considerable institutional demand for access to the platform's SME loan portfolio. The technology driven OnDeck has now released the numbers for institutional activity in Q2 2015, and business appears to be booming.
A record $143m of small business loans were flogged on the OnDeck marketplace between April 1st and June 30th. That’s a 55% increase on the previous quarter, in which $92.1m of loans were sold. A major facet in the Q2 sales growth was a single-transaction portfolio sale worth $51.9m. The bundle of loans was purchased by an unnamed “leading global investment firm”, and supposedly reaped record gain-on-sale numbers for the platform.
Howard Katzenberg, Chief Financial Officer at OnDeck, commented on the significance of the quarterly growth and the landmark portfolio sale:
"We believe institutional investors are increasingly seeking exposure to short-term business loans, as evidenced by the opportunity we had in the second quarter to grow our Marketplace business on very attractive terms. The portfolio sale supports our long-term diversified funding strategy, is a natural extension of Marketplace and demonstrates the appeal of OnDeck's loans and our platform to institutional investors. It also provides a useful template for continuing to meet the significant institutional demand for Marketplace loans, as we anticipate executing similar portfolio sales quarterly going forward depending upon market conditions."
Of the $143m in loans sold in Q2, 19% were originated prior to the quarter and had been held by OnDeck for investment. In other words, OnDeck had funded these loans in the first instance, and then sold them on the marketplace at a mark up in Q2. Gross revenues for the quarter stood at between $62.5m and $63.5m, of which between $11m and $12m came from gain-on-sale. The platform's adjusted EBITDA Q2 2015 was between $8m and $9m, and GAAP (Globally Accepted Accounting Practice) net income stood at between $4m and $5m.
Many a former balance sheet lender in the States is sizing up the launch of an online marketplace, whilst some whole loan marketplace platforms are establishing balance sheet capacity. Peer-to-peer players around the world are welcoming increasing amounts of institutional money. Securitisation has also reared its head – with US student lender SoFi leading the way. OnDeck is at the forefront of the “capital diversification” trend.