Upstart Holdings Inc. reported a sharp acceleration in its core personal-loan business and disclosed that it has received conditional Securities and Exchange Commission approval for a national bank charter, even as its macro-risk gauge indicates consumer credit conditions have materially deteriorated.
Paul Gu, co-founder and chief executive, said in a Sept. 8 presentation at the Goldman Sachs Communacopia + Technology Conference that second-quarter growth in core personal loans reached "3.5 times as much" as the prior three quarters combined. He called it "a real trajectory change" in the composition of the company's business.
Shares of Upstart, which trades under the ticker UPST, fell 3.6% to $27.04. The stock is trading in the lower third of its 52-week range between $23.97 and $71.38, against a market capitalization of $2.63 billion and a price-to-earnings ratio of 51.84.
Gu also drew attention to the company's Upstart Macro Index, which stood at 1.5 as of Sept. 3, up 12 points since spring 2024. The index measures the likelihood of default on unsecured consumer credit relative to the 2018-2019 pre-pandemic period; a reading of 1.5 means that, all else equal, a given borrower is 50% more likely to default today than in that baseline period.
Despite that deterioration, Gu said contribution profit generated in the first half of 2024 exceeded levels seen in 2021, crediting "three years of compounding technology wins across the real durable parts of the business." Upstart said it ran on about $1 billion of loans on its balance sheet at the time, largely unleveraged.
On the product side, the company said secured-loan offerings — including auto and home-equity lines of credit — were targeted to reach break-even profitability by the end of 2024. The auto-refi product had been paused during the period.
Operating expenses rose approximately 30% year to date in the first half of the year, but Upstart projected that expense growth would decelerate to low-single-digit quarter-over-quarter rates in the second half. The company attributed a portion of the cost increase to its bank charter initiative, described as the largest discrete project for 2026. Conditional SEC approval clears the way for a national bank launch in early 2027; the enterprise unit is expected to function as a cost center through this year, with benefits materializing the following year. Upstart currently works with nearly 100 originating partners.
Upstart also highlighted its artificial-intelligence capabilities, saying it ranks within the top 5% of technology firms in large-language-model adoption and is realizing gains in code generation, ticket-closure time and revenue per employee. Its underwriting data set contains about 140 million data points, with current models capturing roughly 13% of default-risk variation. Three new personal-loan models were deployed in the second quarter, adding to a model-development history that dates back to the company's founding in 2012.
Addressing the broader opportunity, Gu pointed to a roughly $1.2 trillion credit-card-debt market, noting that approximately half of U.S. consumers hold credit scores below 720.
