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SoFi, so good?

TheStreet Pro's Stephen Guilfoyle thinks so.

The veteran trader, whose career stretches back to the 1980s on the New York Stock Exchange, listened to what SoFi Technologies Chief Executive Anthony Noto had to say during a recent CNBC interview, and he came away impressed.

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"What struck me was that Noto said that his firm had seen 50% inflows in Q2 and that, so far, Q3 was strong in the department as well," Guilfoyle wrote in his Sept. 4 column. "Noto said that SoFi has seen very strong debit spend in Q3, but that it did not come at the expense of deposit growth."

The fintech company's customers are spending on income and not due to some kind of wealth effect, he said. He added that the CEO "is not seeing the kinds of issues with delinquencies that some other institution might be noticing."

"Additionally, while credit cards and personal loans are performing in line with expectations, the firm is seeing very strong investment inflows," Guilfoyle told readers. "Basically, Noto acknowledged that SoFi is seeing improved deposits, improved net flows and improved spending."

SoFi ( SOFI ) beat Wall Street's second-quarter earnings expectations in July and Noto told analysts that "our rapid diversification made a record revenue quarter possible, even with just 5% growth in adjusted net revenue in lending."

Trader says ruling 'plays well for lenders'

"Combined, financial services and tech platform revenue grew 46% year-over-year and now makes up 45% of total adjusted net revenue, up from 38% one year ago," Noto, a former U.S. Army Ranger, said during the company's earnings call.

"We are really encouraged by our team's ability to bend the curves through stringent underwriting, limiting credit exposure on prudent and improving collections and servicing," he added.

Related: Veteran Wall Street trader reacts to SoFi second-quarter earnings

Guilfoyle also noted that SoFi stands to benefit from the U.S. Supreme Court's recent decision not to reinstate the Biden administration’s student loan repayment plan, Saving on a Valuable Education, which aims to lower monthly payments for millions of borrowers.

The plan had been blocked by a federal appeals court earlier this summer because of a legal challenge led by several Republican states

The program was introduced last year after the Supreme Court struck down Biden's larger student loan debt relief plan, which would have forgiven up to $20,000 in student loan debt for as many as 43 million Americans.

The new plan was set to lower monthly payments for many borrowers and allow those with balances of $12,000 or less to have their debt cleared after 10 years.

"By taking the weight off of the taxpayers and placing it back on the borrowers, such a ruling obviously plays well for lenders such as SoFi Technologies," said Guilfoyle, who raised his price target on the company's stock to $10.25, up from $9.50.

Noto said that student loan originations grew 86% year-over-year in the quarter.

"The team drove our strongest Q2 of origination volume in three years by iterating to drive continuous improvement throughout the quarter and into Q3 with private loan financing, which exemplifies our ability to respond to environmental factors to drive results," he said.

SoFi CEO: Student loan refinancing strong

Noto said that student loan refinancing, "a product that shouldn't be doing really well in this interest rate environment ... had strong growth."

"Student loan refinancing is our oldest and used to be biggest product, (and) we think, is starting to come into a period where it can do quite well," he told analysts.

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Last year, SoFi sued the Biden administration over the pause on federal student loan payments, saying the moratorium had no legal basis and had cost the bank millions of dollars in profits.

Student loan payments first were halted at the start of the pandemic by President Donald Trump’s administration. The pause was extended eight times over three years.

SoFi said that its federal student loan refinancing business has suffered because borrowers have little incentive to refinance while payments and interest remain on hold, the Associated Press reported .

Sen. Elizabeth Warren (D-Massachusetts) and Rep. Ayanna Pressley (D-Massachusetts) sent a letter to Noto in April 2023, charging that “SoFi’s attempt to end the student loan payment pause and force millions of Americans into repayment while raking in massive revenues and handing out huge executive paychecks represents corporate greed at its worst."

SoFi dropped the lawsuit a short time later.

More recently, seven Republican-led states filed a lawsuit on Sept. 3 to challenge the Biden administration's latest student debt forgiveness plan, saying the U.S. Department of Education was taking steps to start canceling loans, Reuters reported .

Attorneys general from states including Georgia and Missouri said they recently obtained documents showing the Education Department had instructed federal loan servicers to begin canceling hundreds of billions of dollars of loans as early as either Sept. 3 or Sept. 7 before the rule was finalized.

An Education Department spokesperson declined to comment on the case to Reuters but stressed it “will continue to fight for borrowers across the country who are struggling to repay their federal student loans.”

At the close of the earnings call, Noto said that Q2 was  "the most rewarding quarter, and dare I say the most fun that I've had in some time at SoFi."

"What made it special on fun was that we challenged ourselves to be better in areas that are the most difficult in the current environment that aren't supposed to do well in this environment, such as home loans and student loan refinancing," he said.

"Hard is not for everyone," Noto concluded. "But for me and those who stay at SoFi, it fits just fine."

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