“We have really strong risk controls,” Noto said in an interview with Jim Cramer on the CNBC show “Mad Money.” “We take it very seriously.”
Noto also noted that SoFi wasn’t mentioned as a potential risk to the U.S. economy in a recent speech by Federal Reserve Chairman Jerome Powell, who cited non-bank lenders as problematic for the future of credit markets and the financial system as a whole.
Powell also said that interest rates were “just below” neutral, a reversal from an earlier speech in October, when he said interest rates were a “long way” from neutral. “Just below” means they are not restrictive to the economy, but also not accommodating.
Noto, who used to be CFO of Twitter, told Cramer that when he joined SoFi, “the No. 1 priority was making sure that we focused on quality of loans over quantity of loans.”
SoFi, a millennial-facing company that recently saw a $12 million Q3 loss, knew it would be forced to adjust to ensure that its loans were secure and appropriately backed up.
“We wanted to focus on per-loan economics for two reasons: one, we wanted the loans that we created to be great investments for our asset-backed security investors, but also if we keep them on our balance sheet,” Noto said. “So we made that pivot when I got to the company to ensure that we prepared for the longer-term rising-rate environment.”
SoFi faced an even bigger loss in Q2 of $200 million. The company, at the time, said it would be profitable by the end of the year.