Kevin Barker : Good morning. And thanks for taking my questions. Your balance sheet has grown tremendously over the last year, partly due to the deposit growth. Could you talk about the differences between held for investment versus a held-for-sale strategy? In particular, we’ve seen several companies start to come back to the securitization market in the first quarter with spreads tightening relative to late ’22 numbers. I’m just trying to see how you balance driving net interest income versus potentially some fee or gain on sale income? And how do you think about that for the rest of the year? Thank you.
Anthony Noto : Yes. Thank you for the question. We noted in the press release and prepared remarks that we hit a couple of key inflection points in the year. One of the biggest inflection points is that our NIM. Our lending net interest margin revenue is now greater than our noninterest revenue, and that’s a pretty big milestone. It reflects a lot of initiatives over the last five years, one of which was getting the bank license and being able to use the deposits to fund our loans and not have to recycle that cash through quick sales, et cetera. So we have the luxury of being able to look in the marketplace, look at our balance sheet and make the best decisions for long-term returns. And as we’ve done that, we’ve been able to hold loans longer and generate that revenue stream that’s more recurring from net interest margin.
You should expect the NIM to continue to grow, both in absolute dollars and as a percentage of total revenue in the lending sector. The second big accomplishment was that, for the full year, we were able to — sorry, in the fourth quarter, we were able to get the NIM revenue greater than the directly attributable fixed cost of the lending business, meaning the non-interest income lending revenue was it needed to get to profitability at the contribution basis in Q4, which is another big milestone but you should expect that to continue to grow. It is a revenue stream that’s more visible, more consistent than gain on sale noninterest income. But we have the luxury of making the best choices based on the marketplace. I’ll let Chris talk about the specifics in terms of securitizations versus whole loan sales versus holding.
Chris Lapointe : Yes. In terms of the ABS market, we’re seeing the exact same trends that you highlighted in your question. Back in November, we actually did a $600 million term securitization deal at an attractive cost relative to where we expect warehouse cost of funding to be in 2023, and things have continued to improve in the overall market in the first month of this year. So we expect to be able to access that market here in Q1 and for the rest of the year.
Operator: Our next question comes from the line of Moshe Orenbuch of Credit Suisse. Your line is now open, please go ahead.
Moshe Orenbuch: So maybe as a follow-up to that, can you talk about what you actually sold during the quarter in personal and students? And did you actually buy any portfolios during the period as well?
Chris Lapointe : Yes, I can hit on that. So in terms of sales for the quarter, we ended up relying predominantly on deposit funding, warehouse funding and that term securitization. We did about $200 million worth of whole loan sales and the $600 million term securitization, so about $800 million in total. In terms of loan purchases, like I said during the last quarter, having the bank with a large and growing deposit base, provides us with much more flexibility and a new source of funding our loans, which allows us to grow the balance sheet and hold loans for a longer period of time. There are a few ways that we can bring loans on to the balance sheet. We can go out and pay an upfront marketing costs and originate them, or we can purchase the loans.
So similar to Q3, we had the opportunity to buy some seasoned loans. This time, they were from — they were in the student loan refinancing space, and these were all loans that we originally underwrote. Overall size was about half of what we did in Q3. And given the credit quality loss profile and return characteristics, we jumped on the opportunity as we knew the borrower best, and it’s will set us up for really strong net interest income in the coming quarters given our overall cost of funding. And then we also had a few hundred million dollars of normal course cleanup calls on some of our consolidated securitizations that were several years seasoned.
Operator: Our next question comes from the line of Eugene Simuni of Towers . Your line is now open, please go ahead.
Eugene Simuni: This is Eugene Simuni from MoffettNathanson. Hi, guys, how are you? Quick question from me back to the outlook for 2023, very helpful to have the call, Chris. But I was wondering on the swing factors, let’s say, the factors that would allow you to go to the high end of your guide. What would be the top two or three things that you guys are looking for that could swing the results here in 2023?
Anthony Noto: Eugene, thank you for the question. There’s a — Chris laid out in our prepared remarks some of the underlying assumptions, both macro and micro. On the macro side, GDP growth, that’s not as a dower as we have in our forecast and our implications, so a stronger economy than what we have. And we have a, we think, a relatively conservative i.e. low number for GDP, decline of about 2.5%. Unemployment, we had at 5%. That’s a factor if it comes in worse than that, that could be a negative, a tailwind would be if it sells in the 4s. And then on interest rates, we have them peaking up 5% and then coming back down to about 4.5%. If rates came back even more than 4.5% and sold than the 4% range, I think we could be at an optimal part of the curve as it relates to passing on coupons, profitability per loan as well as the NIM that we can make relative to our deposits would be a pretty good outcome.
Separate from that, for the technology platform sector, we have a really robust pipeline. It’s more diverse. But more importantly, there are many members — sorry, clients in our pipeline that have large existing consumer bases or user bases. And to the extent that those become launched in 2023 before the second half of the year, we can benefit from upside in those large partners coming on board from the tech sector. As it relates to the financial services sector, I really believe we have a lot of upside in the invest category. We are quickly launching new products to make sure that we have some table stakes products, but also some more innovative differentiation selection. And I think that if we’re able to launch those to a receptive member base and the user base, it could be a tailwind.
Second thing that could be a tailwind to invest is if the IPO market opens back up, we can underwrite IPOs. We’re the sole retail distribution channel for the Rivian IPO. We participated in the new bank. Our members want access to IPOs and IPO prices. We’re uniquely providing Main Street with access to IPO prices at those — IPOs and IPO prices. To the extent the calendar opens back up, we have a pipeline there as well, which helps both with adoption of the product by new users because they want that unique selection, but it also drives incremental assets under management, which allows us to drive more revenue and monetize more. So those are some of the underlying trends that could give us a tailwind when we pass over to Chris…
Chris Lapointe: Yes. The only other thing I would add to that, Anthony, is back to one of the comments that I made a few minutes ago around credit spreads. So implied in our guidance, and what I mentioned is that we’re expecting to see continued elevated credit spreads throughout the year. Obviously, things are looking pretty good in January and spreads have tightened and the ABS market seems to be showing some signs of life. So if that continues throughout the year, there could be additional upside in the lending business as well.
Operator: Our next question comes from the line of Mihir Bhatia Bank of America Merrill Lynch. Your line is now open, please go ahead.
Mihir Bhatia : Good morning. And thank you for taking my questions. I just wanted to ask about the Technology Platform segment. Sounds like a little bit of, maybe not change but refinement in the strategy as you go after — you’re focusing on quality of clients and bigger clients with existing basis. What are some of the implications of that strategy? And I was also curious in terms of just new product introductions or cross-sell to existing clients in that segment, like as we think about your growth from here, how much of it is going to come from cross sell, cross biofuel in that segment versus some winning some of these new large partners? Thank you.
