SoFi Technologies, Inc. (SOFI) Earnings Call Transcript & Summary

All right. Good afternoon, everyone. Thanks for attending the Stephens afternoon fireside chat with SoFi. My name is Vincent Caintic. I'm the Stephens' Specialty and Consumer Finance analyst here. And I'm pleased to be hosting SoFi's CFO, Chris Lapointe. I also wanted to highlight, we have the Head of Investor Relations, Josh Fagen, if you want to have a conversation afterwards. So Chris, thanks very much for coming. I have to say that SoFi is the most interesting name I cover so -- certainly the most dramatic amongst the investor base I cover, many passionate people in both the bullish and bear side. So I hope to address both of those theses. Maybe just to start off, though, if you can give an introduction of SoFi for those who might not be aware of the differentiations.

Yes, absolutely, and thanks for having me. So in terms of SoFi, I joined back in 2018, and our mission as a company is to help our members achieve financial independence in order to realize their ambitions. And in order to do that, we need to enable them to borrow better, save better, spend better, invest better and protect better. In order to do that, we've created a comprehensive set of products and services across all of those dimensions that enable them to do exactly that. So right now, we're operating in 3 operating segments. Our Lending business consists of student loan refinancing, unsecured personal loans, home loans and in-school loans. That's a business that's been growing quite nicely and is delivering 60-plus percent margins today. Our Tech Platform business is a combination of our acquisitions of Galileo and Technisys. That business is generating about $100 million of net revenue and 36% contribution margins. And then we operate in Financial Services, which consists of our checking and savings business which has grown quite nicely to 2 million accounts. It's a product that enables everyone to do all their banking needs, all in one mobile application and in one device. It also includes brokerage, credit card and our lending as a service business. So we've made tremendous progress over the course of the last several years in achieving that mission, and we're excited about the future opportunity.

Okay. Great. I wanted to touch on -- so we're going to talk about many of the bull and bear cases. I'll start with some of the bull cases. And I wanted to just let the audience know in advance. I'll pull the line every 10 to 15 minutes or so for questions. So always great to have live audience participation. Maybe first, we'll start off, it's been a very highly competitive environment, other banks in the third quarter earnings season have been talking about, say, deposit balance declines tightening their lending a bit. How has SoFi been able to attract balances and actually have -- keep NIM expanding at the same time?

Yes. We're really excited about the progress that we've made since opening the bank back in February of 2022. We're at a point where we have 2 million accounts and $15.7 billion of deposits. And that's a function of first having a market-leading APY where we offer 4.6% to people who do direct deposit with us. And we have an industry-leading product that enables people to do everything that they want related to banking on their mobile device, all in one application. You get 2-day early paycheck, pay a friend, you get up to $2 million of FDIC insurance on your deposits. So those are the factors that are helping contribute to the tremendous growth that we've seen in overall deposits. That's translated into, like I said, $15.7 billion of deposits, 90% of which are coming from direct deposit members and 98% of which are fully insured by the FDIC. Our ability to continue to expand our net interest margin is a function of 3 things. First, our loans pricing betas are well north of 100%. Second, our deposit APY betas are less than 100%. And then third, we're seeing a dramatic shift in the overall funding stack to being more deposit driven versus reliant on warehouse capacity. So to give you a few specific examples on the loan pricing beta over the course of 2023. The weighted average coupon of our personal loans book increased by about 110 basis points throughout the year, and the underlying interest rates have increased by about 55 basis points. So we have a 200% beta on our personal loans book. On the student loan refinancing book, the weighted average coupon of the portfolio has increased by about 60 basis points, and the underlying interest rates have increased by about 60 basis points. So 100 basis -- or 100% beta on the student loans book. So net-net, on average, we have about 165% beta on our yields or the pricing of our loans. Now moving down to deposits. Since we opened the bank, on average, we've had betas in the 60% to 65% range. Year-to-date through 2023, those betas are right around 75%. So you've got 165% beta on our pricing of loans and the yields and a 75% beta on our APY of the deposits, which is helping contribute to the 5.99% net interest margin, which has expanded both on a sequential basis and year-over-year, and we expect to maintain strong NIM margins going forward.

Right. So those are pretty impressive numbers. And maybe if you can deconstruct that a little bit. So the 165% beta on yields, your credit performance has been strong, you're targeting prime consumers. So wondering if you could discuss like how you're able to get those strong interest rates and attract the strong performance from the consumer?

Yes. The reason that we're able to generate the strong interest rates is because we target high prime or super prime customers. Right now, the average FICO of our personal loan consumer is about 746 with a weighted average income of $160,000. And the credit profile of that member is extremely strong. Right now, we're realizing about 3.4% annualized losses in our personal loans book. And we expect to maintain really healthy loss rates relative to industry norms. Prior to COVID, loss rates were in the 4.5% range. So over the course of the last several quarters, we've been well south of that. Now we do expect a normalization back to pre-COVID levels over the course of the next several quarters but expect to be able to maintain really healthy credit with that borrower base.

When -- you talked about your TAM opportunity. Is that open space? Are you taking share from others? And any other direction, like how are you able to grab that...

Yes. We're excited. We've built a comprehensive set of products and services that are durable and diversified. We have businesses that do extremely well in different types of macro environments. Some do better in high-rate environments, some do better in lower rate environments. But net-net, we've built a comprehensive set of products and services that are durable through a cycle. In addition to that, we've been a secular grower where we are gaining share in nearly every single product that we are offering today. Just to give you a few specific examples in SoFi Money right now, we have about 2 million accounts today. The overall market is several hundred million accounts in our credit box, spread across over 1,000 banks in the United States. We've been able to generate $15.7 billion of deposits over the course of the last several years in the bank. If you look back at Q3, we grew deposits $2.9 billion sequentially, while the majority of the top 10 financial institutions actually lost deposits. So where you're starting to see us gain share is from the top 5, 10 U.S. financial institutions. On the student loan refinancing side, we are a market share leader there at 60% market share. There's a large market opportunity for us especially now that CARES has expired and people -- federal borrowers are going back into repayment. Given where we can price today, we think that there's about a $200 billion total addressable market for people who can take out a loan with SoFi at a lower rate than what they're paying today. And that doesn't even include people who haven't been making payments over the course of the last 3 years and maybe looking to lower their monthly payments starting in October and would be willing to sacrifice a higher APY and extend out their term in exchange for a lower monthly payment. On the personal loan side, it's a fairly fragmented market. We're at about 9.5% market share of unsecured lending within our credit box, so north of 680 FICO score. We're going to continue to be relatively prudent and modest in our approach to growing that business going forward. Right now, we're only approving about 25% of all borrowers who come in through our funnel, but we're still able to monetize the other 75% through a marketplace where we get paid a referral fee, and we don't actually take the loans on our balance sheet in a super high-margin business. Our home loans business, there's a ton of headroom. There's obviously a bunch of rate pressure right now in the market. Right now, we're at less than 0.1% of the overall market share. So despite rates being where there are, there's still a bunch of headroom. In addition to that, 1% to 2% of all SoFi members who take out a home loan today are actually taking them out through SoFi. So we have a huge opportunity within our existing member base where we would not have to pay significant customer acquisition cost to actually grow that business. And then in addition to that, the last thing I would say is our invest business, we are expanding the pie there from a market perspective where we're giving access to brokerage capabilities to people who are first-time investors. So in addition to being able to gain share, we're actually expanding the pie there. So net-net, really proud of the progress that we've made and the secular growth nature of our business.

That's great. Yes. And I mean, it is fascinating compared to the other banks out there that you've been able to grow and others I've talked about, pulling back. You're only approving 25% of loans that you're getting, your underwriting is very strong. So is it the -- like just trying to get to the secret sauce, but is it the funnel of applications that are coming through, you're getting more of that, you're able to track better distribution or -- maybe if you could talk about...

Yes, it's a maniacal and ruthless focus on underwriting the best credit that we can. We're constantly tightening credit on a quarter-to-quarter basis. We have an overall risk tolerance of underwriting to a 7% to 8% life of loan loss basis, but we're constantly evolving how we underwrite our credit. We have a world-class risk and credit team that has decades of experience and have navigated through a number of different cycles, and they've done a phenomenal job of building out our infrastructure to enable us to have the high credit that we do.

Okay. Great. Just wanted to see if there's any audience questions...

I wanted to start.

Yes. Go.

Can you sort of walk through cumulative fair value adjustment on the personal loan side like puts and takes, changes to assumptions over [indiscernible] that's obviously [indiscernible] marks.

Yes, absolutely. So there's been a lot of questions about our fair value accounting. There's 2 methods to account for our loans. There's fair market value accounting and cost accounting, we follow fair value accounting. We view that as being the best way to account for loans because we are taking unrealized losses and gains through the P&L each and every quarter and that's hitting our equity value. In terms of the specifics on our fair value marks in period, they were 104.0%, that was down 10 basis points sequentially, that was a result of an increase in benchmark rates, which led to an increase in our discount rate, and that was partially offset by an increase in the weighted average coupon of our loans. What I would say is in period, we did do loan sales that were above the execution of 104%, we ended up doing a $15 million loan sale at an execution of 105.1% in period. We did a $100 million whole loan sale at an execution level of 105.1% in period, and we just closed on our ABS transaction that we announced during the earnings call with BlackRock at a 105.0% execution. So all execution levels above where the book is marked today at 104.0%.

[indiscernible].

Yes. So there are a number of things that impact the mark-to-market every single period. It's changes in default CDR assumptions, so cumulative default rates, cumulative prepayment rates, interest rates and then the spreads that a buyer is willing to pay. So in a situation where prepayments accelerate, that would reduce the value of the overall loans. If they slow down, that would increase. But every single period we are taking into consideration changes in every single one of those variables. The reason that we've been able to sustain the gain on sale margins that we have over the course of the last several years is first because we've successfully been able to keep pace or actually outpace increases in the benchmark rates. I said this earlier, where our weighted average coupon increased by 110 basis points year-to-date versus 55 basis points on the underlying benchmark rate. And we've been really successful in hedging out the interest rate exposure for the back book.

Great. Perfect. Let's kind of dig into the loan sales. So I guess, before we talk about the most recent potential agreements, let's maybe broadly first talk about how you decide between selling loans versus returning -- retaining those loans on the balance sheet?

Yes. So what I would say at the highest level, what we're seeking to do is to maximize the returns of every single loan that we're originating in every single asset that's sitting on our balance sheet. Our ability to maximize those returns has certainly evolved over time. So if you rewind back to 2018 when I first joined, we used warehouse funding and our own equity capital to originate loans. Given that constraint of having those 2 funding sources, we were forced to turn over the balance sheet 4 to 5 times a year. Now fast forward to where we are today, we have a very large and growing and sticky high-quality deposit base which serves as a third source of funding for us, which has given us a tremendous amount of flexibility to hold loans on the balance sheet for a longer period of time and actually realize the returns that those assets can generate. Just to give you an example on our personal loans, we're generating about a -- we're generating an annualized return of about 6% on those assets today. They're generating a yield or a weighted average coupon of 13.8%. This is the entire portfolio. They're generating 3.4% annualized losses and we have about a 4.5% cost of funds. So 13.8% minus cost of funds and the annualized loss rate is about a 6% return. That's on an annualized basis. That compares to where the book is marked and where we can sell at about 104.0%. So there's a significant delta between what we're generating on the books or what we're generating by holding versus selling. And at the end of the day, we're going to continue to optimize and maximize returns while ensuring that we're maintaining robust capital ratios.

So potential question on the deal structures then. Chris, there's been focus -- a lot of focus recently at the $15 million sale in the quarter and implications for the other announced sale in October as well as your forward flow agreement. And I think maybe if you could touch on those in more detail what are people potentially missing from those discussions.

Yes. There's certainly a lot of attention since the Q was published and even before that. And in hindsight, I would have loved the opportunity to address these questions and concerns during our actual earnings call. We didn't emphasize the structural components because if you look back over the course of the last 10 years, every single one of our personal loan, whole loan sales included an upfront purchase price and an ongoing servicing strip. So we view this as a normal course deal that had those 2 components, consistent with what we've done. That servicing strip gets capitalized and is embedded in the execution that we report publicly and is embedded in the fair market value marks of the deal. If you look back over time, there are going to be deals that have a lower upfront purchase price and a higher servicing strip. There's going to be deals that have a higher upfront purchase price and a lower servicing strip. This $15 million deal that we did back in September, the borrower paid an upfront purchase price in line with the principal balance of the loans and an upper 3% servicing strip that gets capitalized and translates to about 5.1% of value. So we have the flexibility to meet our buyers where they are. And a lot of questions have come in to me and people are saying, "Why would a buyer do that? Why would you do that as SoFi, it seems different than what you've done historically." For the buyer, it's easy. It's lower cash out of their pocket on day one. But in exchange for us, the reason that we do it is we require a higher return in the form of a servicing strip and we require that higher return because we're taking on more prepayment risk and a much lower default risk, which is typically capped, But all of that is priced into the price of the loans that we're selling and the servicing that we're offering. So we're going to continue to be flexible with pricing and structures, especially given the size of our balance sheet and experience. And there are a number of ways that we can monetize these various components of the structure of these deals. For instance, when people typically do whole loan purchases from us, they typically go out to other banks and get leverage from them. Given the size of our balance sheet and our experience underwriting this type of credit, we have the ability to provide financing to these borrowers at a really attractive rate in a fixed term structure, and these financings would be secured against the underlying assets and equivalent to an investment-grade bond, if you were to do a securitization for the same pool of collateral. So you'll start to see us doing some of those deals in the coming quarters. In addition to that, there are times where we will offer capped performance rebates or capped loss shares. And those are typically very small. In this situation with the $15 million deal that we did back in September, there was a very small loss share, but that was capped and that capped amount was in line with where the book was actually marked at the end of the quarter. So the best way to think about it is there are a number of ways that we can monetize through the structures of these loan sales. And there are even situations given prepayment -- the prepayments and the loss shares that we -- and financing that we would actually be able to generate more cash flows than where the loans are marked on the books today.

Okay. That makes sense. Is there a way -- I mean, people have a lot of these questions and a lot of focus on these details, so what should we be paying attention to as investors looking at this portfolio to make a determination of how the economics that are going to your business?

Yes. I think it's looking at totality of the deal. And this deal specifically and consistent with the $100 million deal that we did in October, the forward flow that we signed and the ABS transaction that we did with BlackRock, the overall economics of the collateral that we are selling is at a premium well north of par and even north of where they're being held on the balance sheet today. So you have to take a look at every structural component of these deals, not just the upfront purchase price that you get on day one but the ongoing cash flows associated with those deals and other monetization structures that we have embedded in there.

Great. I just wanted to see if there's any other audience questions. Okay. Yes, sure.

Okay. In terms of keeping loans on the books, offset by deposits, you'd sort of think modeling through a recessionary environment versus coming out of recession, et cetera help the consumer FICO scores, whatever the case may be in terms of held loans at [indiscernible] of your balance sheet relative to core deposits et cetera, like is there a healthy sort of loan deposit ratio in your case like there would be in a typical bank?

Yes. Right now, we're still not at the level that we want to be at, but we're still relying on about $4 billion of warehouse capacity, about 65% of our loans are funded via deposits. So we expect that level to get north of 80%, maybe even 90% over the course of the next several quarters is how we're thinking about it today. But we're generating really meaningful returns as a result of having these deposits. We're generating 6% net interest margin and really strong returns on both our personal loans and student loans. So we will continue to do that all while maintaining our strong capital ratios.

Sort of targeted longer-term [indiscernible] loans deposited sort of once you get there?

Yes. We'll probably be 90-plus percent. These are high-quality, sticky deposits. Again, 90% are from direct deposit members and 98% are fully insured by the FDIC.

Okay. Great. Yes, sure.

What are your -- customer acquisition [indiscernible] for getting [indiscernible] and how do we expect that to evolve...

Yes. So we've made tremendous progress on our customer acquisition costs. If you look at our overall sales and marketing as a percentage of revenue at the corporate level, those were down 300 basis points year-over-year and also down sequentially. A good reason for that is because our cross-buy rates have remained at relatively elevated levels. About 30% of all new accounts that are taken out on our platform are coming from existing members on that platform, where we're not having to pay that second customer acquisition cost. So that affords us the ability to go out and pay for those direct deposit members because we're not necessarily focused on a target customer acquisition cost, we're focused on generating the highest lifetime value for that number. And right now, the payback periods on direct deposit members are less than 12 months. And we're at the customer acquisition cost levels that will enable us to get to our longer-term target margins of 30% adjusted EBITDA margins and 20% GAAP net income margins.

Okay. Great. Maybe going back to the loan sales and some of the other questions I've been getting. So there's always been this debate about -- so you've been able to execute these loan sales, you're getting above par gains. When it seems like other fintechs have struggled just to make that comparison to when they're trying to sell their originations. How are you able to get it done versus some of these other fintechs that you're being comped against?

Yes. I think part of it is we have a consistent track record of delivering assets that have -- that are high-quality credit and durable. We've talked a lot about the loss rates on our personal loans that we underwrite. They're even better on student loans at only 38 basis per year. So it's a consistent and constant track record of delivering predictable losses for these assets. Second is we have the flexibility to create structures in these transactions that meet the buyers where they need to be from a returns perspective and are also beneficial to us. The third reason is we're able to do this at scale. A lot of buyers are looking to do -- or put money to work at scale and instead of going to a large number of loan sellers, they would prefer to do it with a few select partners. And then finally, we're a long-term stable partner for folks. There is a ton of bespoke transactions and assets out on the market today. It's super costly and timely to do a single transaction. So people would prefer to have an ongoing stream of asset generation that they can rely on in some of these forward flow and larger transactions.

Okay. Great. You mentioned your partnership with BlackRock on those ABS sales. If you could talk about that in more detail on the economics...

Yes. No, we're really pleased with the partnership. It's a phenomenal partner, and we appreciate BlackRock. We ended up closing the $375 million deal this past Friday. This was a traditional ABS structure where we sold both the bonds and resids and retain the normal 5% strip in a vertical way. The execution level, as I mentioned, was 105.0%. It did consist of an upfront payment and an ongoing servicing strip. There was a premium to par in the upfront purchase price and a slightly smaller servicing strip in the 3-ish percent range. But net-net, the overall economics and value to us was similar to what we achieved with the $15 million deal.

Okay. Great. That's a great update. And are you able to talk about the $2 billion forward flow agreement in more detail like maybe some of the characteristics? Are you -- is there any requirement to sell it over -- into it over time? The marks, are those set? And any other economic parts to it like the risk sharing and so forth.

Yes. So you'll see more details as we execute on the transactions in the coming quarters but it's a commitment for the buyer to buy and for us, the seller to sell $2 billion on -- in smaller increments on a regular time frame over the course of the next 12 months. The structure is going to be very consistent with the $15 million deal that we executed in September with an upfront purchase price that is at or slightly above the principal value of the loans at the time and then there's going to be a larger servicing component, which is fixed [ and ] contractual over time and that will get capitalized and embedded in the execution level. The -- we will, as I alluded to earlier, have the ability to provide financing for these transactions. These will be -- this would be secured financing that would be treated basically as investment-grade bonds, if we were to do a similar ABS transaction, and we're generating a really good yield from a NIM perspective that we otherwise would not receive.

Okay. Great. So not only do you have the forward flow agreement, you have the ability to provide financing and then you're perhaps going to be able to use your BlackRock -- your structure that you've just...

No. I was alluding to the financing and just comparing what the financing would be if we were to do something similar in an ABS construct where we retain a portion of the vertical slice. And then the portion that we're actually financing is akin to an investment-grade bond.

Okay. That makes sense. And so you've illustrated these examples already. What is the -- and again, in contrast with some of the other fintechs I -- like what is the pipeline or the appetite for more of these, say, forward flow agreements, say ABS structures and so forth?

The appetite and demand has been extremely strong as is evidenced by the transactions that we've publicly announced and this forward flow transaction, we have the capability to be extremely flexible with structure and buyers really appreciate that. So we're really excited about the demand that we're seeing today. We will continue to maximize the returns of all the assets that we have.

Okay, perfect. I want to see if there's any more audience questions. Yes.

You said on the last call that [indiscernible]. Anyway, I know like FICO is [ certainly ] the best we have. It's more like a [indiscernible] like how do you guys adjust through underwriting when you see like something is [indiscernible].

Yes, we're constantly monitoring and cutting out credit. We have made tweaks around the edges and tightened credit consistently over the last several quarters. Like I said, the approval rate for loans coming in through our funnel is only 25%. So we're still turning away a significant amount of really high-quality credit. At the end of the day, we track stuff on a day-to-day, week-to-week, month-to-month basis. And if there are certain cohorts that breach or start to head towards a life of loan loss profile or a curve that exceeds our risk tolerance, we would cut back on that channel immediately. We have the flexibility and the nimbleness and the tracking capabilities to be able to do that, and that's what's enabled us to maintain the pristine credit that we do have on our books today.

I guess just a follow up [indiscernible]. The profile of borrowers like -- many people consider [indiscernible] what is catalyzing these people, if you have an inside into it, to borrow it at [ 13%, 14%, 15% ] rates?

Yes. The majority of the folks who are taking out unsecured personal loans with us are people who are refinancing or consolidating their credit card debt, where they have variable interest rates and have the opportunity to refi into a fixed rate structure and lower their monthly payments.

Okay, great. Yes.

Yes, that's sort of 25% approval rate, 100% plus that you've alluded -- you mentioned a couple of times. How has that trended over the last 4 to 6 quarters. And is that sort of like a leading indicator sign for where you're seeing progression in the book?

It's been fairly consistent over the course of the last year plus at this point. But we're constantly monitoring. It's not necessarily just approval rates that we're tracking. It's day 10 delinquencies, day 30 to 60, where we're tracking and monitoring every single cohort curve by channel on a week-to-week, month-to-month basis. And that's what's informing our decisions to pull back as necessary.

Okay. Great. I wanted to go back to the fair value marks. And lot of investors have focused on this and they may be worried that there's some sensitivity to the fair value mark. So maybe if you could talk about the conservatism in your revenue recognition and your fair value marks, I mean for instance like how bad would things have to get in order to have to mark down your portfolio?

Yes. So what I would say on the fair value marks, we work with an outside party to derive the actual fair value marks and these are meant to represent what a buyer is willing and able to pay at any given point in time. And that's why we mark-to-market every single period, and it adjusts for all of the characteristics that I mentioned earlier. Embedded in these specific marks in terms of our CDRs versus what we're actually realizing in our personal loans business, the book is marked assuming a 4.6% CDR. What we're seeing is 3.4% on the entire portfolio. So 120 basis points of spread on an annualized basis or 180 basis points of delta over the life of the loan. In the student loan portfolio, what's actually embedded in the marks is 50 basis points of annualized losses. What we're actually realizing is 38 basis points, and that 38 to 40 basis points has been consistent over the course of the last 5 to 6 years. So there's about 20 to 25 percentage delta between what we're actually realizing and what's embedded in the marks today.

Okay. Great. So I think on the earnings call, there was some discussion about being more conservative about loan growth and maybe the tighter underwriting. I guess if you could talk about what's driving that. And then relatedly, it was another discussion that -- having with investors is this concern about the ongoing premium amortization. So this view that, how much pressure do you have to continue to originate loans?

Yes. What I would say on the first component, I'll hit the amortization second. On the first component, we have a ton to be proud of. We've built a comprehensive set of products and services that are durable. We're a secular grower. We were going to reach GAAP profitability in Q4. We just turned the corner on Financial Services of reaching contribution profits in period, and we expect that to continue over the course of the next several years. We're going to continue to grow our tangible book value in a meaningful way over the course of the next 12 months. In Q3 alone we generated $68 million of tangible book value and over the last 12 months, we generated $170 million of tangible book value. So the combination of getting to GAAP profitability and constant growth and profitability in our Financial Services segment and expanding margins in the Tech Platform is going to enable us to continue to grow tangible book for the foreseeable future. Next year, we expect to grow our tangible book value by $300 million to $500 million. What's important to note here is that for every $100 million of incremental tangible book value that we're generating, we're generating $800 million of organic lending capacity associated with that. So $300 million to $500 million of growth in tangible book equates to about $2.4 billion to $4 billion of organic tangible book value that we're able to generate. So back to your question on the growth outlook for student loans and personal loans. What I would say there is there's a lot of macro uncertainty out there right now. We're really optimistic about everything we've been able to achieve, but we also have to be mindful of what's happening around us. There are going to be market participants and peers that are not able to grow deposits in the same fashion that we are. There are going to be market participants and peers that are not able to manage interest rate volatility in the same way that we are because they don't hedge out that exposure. So while we may be in an environment that's uncertain, and we may be in an environment where interest rates stay higher and more volatile for a longer period of time, we do think that demand for our products and our ability to capture that demand will remain extremely robust, but we need to be mindful of the turmoil that's happening around us. And in that type of environment, we're going to take a more cautious and conservative approach to our lending. In that environment, our personal loans could be flat to slightly up. Our student loan business could grow just modestly, but we're going to be mindful of everything that's happening around us. And on the amortization point that you made. What I would say there is -- a number of folks aren't calculating the amortization or the pull to par accurately in their models. But what I would say there is as long as our loss rates remain below where the book is marked, the net interest income, as long as we're originating at a level that keeps pace with the amortization down of the book, we're going to be able to grow our top line revenue. Take for instance, what we guided to in Q4. What's implied in our Q4 guide is 27% to 32% top line growth, and that's assuming that the personal loans business is going to be down sequentially from an originations perspective, as I pointed out on the call.

That's very helpful. And then the last one in terms of some of the bear case questions or concerns that I get is this concern that at what point do you need to sell loans or raise equity to continue to run the business? Is that driving some of the recent loan sales activity?

Yes. So what I would say there is we have a plan that will enable us to grow at the pace that we want to grow without needing to raise capital and maintaining really healthy capital ratios. There are a number of tailwinds that we're seeing right now that I've alluded to, but I'll summarize them again. First and foremost, we're going to -- we have been, for the last several quarters, and we'll continue to grow tangible book value. In 2024, we're going to grow tangible book value by $300 million to $500 million. That equates to $2.4 billion to $4 billion of organic lending capacity. The second thing is that the amortization down or the payments on our lending book right now is at $2 billion per quarter, which translates to about $8 billion per year. So you have $8 billion of payments that are coming off the balance sheet, plus $2.4 billion to $4 billion of growth in organic lending capacity. And then we have like really strong buyer demand. We have a $2 billion forward flow agreement for next year, and that's just starting to scratch the surface of the demand that's out there. So we feel really good about our overall positioning and ability to maintain really healthy capital ratios given those tailwinds that I just mentioned.

Okay. Great. Got a couple of minutes left. Just want to see if there's any more audience questions. Okay. Great. So we've talked a lot about fair value [ market ] loan sales. It all has to do with the lending side of the business. But on the earnings call, you were talking about that it's the other 2 parts of the business that's really going to be driving the growth going forward. If you could touch on that, what's driving that acceleration on the other side?

Yes. So like we mentioned on the earnings call, a significant portion of the growth in Q4 and 2024 is going to come from our Tech Platform and Financial Services segments. In Q3, 67% of the absolute dollar growth year-over-year came from Tech Platform and Financial Services, and we expect that trend to persist going forward. In 2024, we expect 50% of our revenue to be from Tech Platform and Financial Services and then the remaining 50% from Lending. That's a function of a few things. First, Financial Services, we just reached profitability of $3 million. That's up from a $4 million loss last quarter, a $24 million loss in Q1 and a $44 million loss in Q4 of last year. What that's enabling us to do is to continue to invest at a significant pace to grow that segment without having to absorb the losses that we have over the course of the last year. And what's even more important is that we've been able to generate that profit in that segment all while having about more than $100 million of annualized losses in our investing and credit card business. So you can imagine, as those businesses start to turn the corner in terms of profitability and we continue to see the demand on the checking and savings side, there's a ton of room for growth and margin expansion on Financial Services. In addition to that, the overall monetization per member and per account is not linear. And we're going to continue to grow monetization per member that we acquired -- for every member that we acquired over the course of the last 12 months, in addition to new members that we're bringing on. So you've seen a really strong uptick in monetization in Financial Services. It was at $50 this past quarter, which was up meaningfully sequentially and year-over-year. And then you're going to see an acceleration of revenue in our Tech Platform business as a result of the change in strategy to focus on more durable, larger financial institutions and larger customers with large installed bases. We've never been more excited about the demand that we see in the Tech Platform business. We're in conversations with a number of the top financial institutions right now in RFPs and couldn't be more excited about the revenue opportunity there.

Okay. Perfect. And then last one for me. So we're a long way from maturity but maybe looking at that point, if you could discuss the economics of how we should be looking at this business...

Yes. So we've made a ton of progress over the course of the last several years. Our overall outlook and the economic profile of our business has not changed since we went public. The way to think about it is from a top line perspective in the medium to longer term, we expect each and every one of our segments -- each of our 3 segments to contribute equally to the revenue profile unlike the last several years, where Lending was the main driver of growth. You're going to see that shift to Tech Platform and Financial Services in the coming years. From a contribution or margin perspective, our Lending business has been operating at the 60%-plus range for the last several quarters. We expect to maintain really healthy margins there in the 50% range going forward. Tech Platform, we've been operating in the 20% to 30% level. Last quarter, we did 36% margins. We think the appropriate near-term margin profile is 20% -- high 20s to 30%. And longer term, those could be 40-plus percent. And then in Financial Services, the margins will be mid-20s to mid-30s in the longer term. Like I said, we're going to reach GAAP profitability in Q4. We're going to continue to grow tangible book value and our longer-term ROE target is 30%.

Okay. Great. We are out of time, but if there's any last audience questions, we can sneak in. Going once, going twice. All right. Well, thank you very much...

Great. Thanks.