Sofi CEO Anthony Noto joins Yahoo Finance Live to discuss the company's Q3 earnings.

Video Transcript

- SoFi shares are rocking in the premarket, as the fintech posted better than expected sales and earnings for the third quarter. Company also signaled an acceleration in sales growth for the fourth quarter as it continues to expand its product suite. SoFi CEO Anthony Noto is here with us now. Anthony, always nice to see you here.

So Coinbase, they had a bad quarter, stock gets whooped. Robinhood, bad quarter, stock gets hit. Your stock is up significantly here in the premarket. You are in the crypto space. How were you able to get it done in the quarter?

ANTHONY NOTO: Yeah, our record revenue results really reflect the diversity of our business. We built our business focused on the mission of helping people get their money right so they can get to the point that they have enough money to do what they want, which we call financial independence. And in order to do that, we have to be there for every one of their major decisions their financial lives, and all the days in between.

So we're a one-stop shop for financial services products on your mobile phone. And because we have that breadth of products to serve our members, we have businesses that benefit in low interest rate environments, in high, rising environments, which we're currently in. We had businesses that benefited in the stay at home sector-- secular shift, as well as the reopening trade. And that diversification is allowing us to really focus on those areas that are in greater demand, as opposed to companies that may be only in crypto or only in brokerage or only in lending, or benefited disproportionately from stay at home or-- and now are getting hurt by that.

So our record revenue the quarter really reflects a benefit of our strategy playing out to three diverse businesses and the successful execution by our team. It's been a yearlong sprint that we've achieved a number of really key milestones to get to this point where we have all of these products on our platform, everything from four different types of loans, the ability to buy stocks, fractional shares without commissions, buy ETFs. We have six of our own ETFs that are customized based on our members' interests. We also have robo accounts. And one of our robo accounts was just recognized by Barron's as being the number one in its class.

And we also have cryptocurrency. We also have a SoFi credit card and then SoFi money, which is like a checking or savings account, where you can do your direct deposit, pay your bills or pay your friends. And we also have insurance. All on your mobile phone, no need to go to a branch or talk to anyone.

- I did a double take, Anthony, listening to the earnings call last night. You have 28 cryptos on your platform. I remember when you just started at the company. That is a big number. How many more cryptos do you want to add and how big is your crypto business right now?

ANTHONY NOTO: Yeah, we really want to differentiate each one of our products based on a number of factors, one of which is selection. And so when we launched SoFi Invest in 2019, we launched it with that broad array of selection. And we've now added selection within that. So fractional shares is a different type of selection than full stocks. And we launched with Bitcoin, Ethereum, and Litecoin initially two years ago, and now we've added more coins over time.

We listen to our members. We look at the data. We hear what they ask for. So we want to make the products that they're interested in available on the platform. We do have a responsibility to educate them about the risks of those products or the right ways to invest. And cryptocurrency is an unproven asset. It's highly volatile. You could lose all of your money.

It should really be a small percentage of your overall portfolio, given the risk profile that it has. It has to be right for the individual. But we'll make it available, and we'll make sure we educate-- and we do-- investors on the pitfalls of investing in highly risky assets, which it is. But we should give them the opportunities they want to make the decisions, to help them in making those right decisions. So we really emphasize dollar cost averaging, recurring investments, and diversification.

- Anthony, this is Emily. I wanted to ask about SoFi's student lending business because, of course, that is still a significant portion of the company here. Now, you mentioned that student lending environment remained depressed in the quarter and that student loan refinancing still had volumes below pre-COVID levels. We saw similar references to a drop in higher education enrollment in Chegg's results earlier this month. Can you talk a little bit about your outlook for this industry specifically, based on what you're seeing at SoFi?

ANTHONY NOTO: Yeah, this quarter, and quite frankly the last year, I couldn't be prouder of our team and what we've built out. When I arrived in February of 2018, we really had two viable loan products and none of the rest of the products that I mentioned. Our student loan refinancing business was our largest and first business. Well, last year, when former President Trump announced in March of 2020 that those with federal student loans didn't have to pay their loans for the foreseeable future-- that's now been extended until January 31st, 2022-- our student loan business got cut in more than half. And so it was our largest business, it was our oldest business, and it was still growing quite nicely. That business has been running about 50% of the pre-COVID volume for the last 20 months.

Well, the diversification we have in our business, the other loan products, the credit card, the brokerage products, the SoFi money product insurance products, they've all picked up the slack, despite the fact that that business, our largest and first business, is at 50% or less of where it was before. I do think there will be a significant increase in those that want to refinance their student loans as we approach January 31st. The moratorium on paying your student loan payments on federal loans is coming to an end. Rates right now are at all-time lows, and it's the best time to be able to refinance, when rates are at zero, as it relates to federal funds rates, which we pivot our rates off of.

So it has been depressed for the last 20 months. Our company has done a phenomenal job of being able to overcome it, as you saw from our record results. But we are about to see a really significant uptick in '22, given that people have to start paying their student loans again. And they have an opportunity to refinance at substantial savings if they choose to do so, given where rates are today.

- Anthony, I sensed on the call last night a slight, a slight shift in tone around the prospect of a bank charter. Do you think that's coming in the next year?

ANTHONY NOTO: You know, there's no defined timeline for an application of a national bank charter. We applied in March for a change of control application for a national bank charter, which will really give us great competitive advantage. It lowers our cost of funding, allows us to give consumers lower interest rates on loans, higher interest rates on checking and savings. It really will be a game-changer for us. It takes a lot to be able to get approved for a national bank charter. It's a really unique asset, and it comes with a tremendous amount of responsibility.

We're really encouraged by the process over the last nine months with the Federal Reserve, as well as with the OCC. We've gone through their exams. The feedback has been constructive. There's a number of other steps in the process, and we're working diligently with them to get through those steps. But we're encouraged by the point that we've reached at this time, but it's never done until they give you the approval. So there's still uncertainty to it, and we think we've done everything we can on our end. And now, it's about a matter of getting through the final stages of the process successfully.

- And of course, on this Veterans Day, Anthony, the Yahoo Finance team thanks you for your service. West Point grad, US Army captain. Thank you.

ANTHONY NOTO: Thank you, Brian. Thank you for having me. I'd also like to give a big shout out to all the veterans out there, those that have served or are currently serving, as well as my first platoon, Bravo Company, second platoon at Fort Stewart, Georgia, 24th ID back then. It was my first experience in the Army. Was a phenomenal experience. The thing that made it so special were the people. And I can't thank all of them enough.

- Well, thank you again. SoFi CEO Anthony Noto, we'll talk to you soon.