Oportun to sell credit card business, aims to boost performance

The online consumer lender Oportun has signed a definitive agreement to sell its credit card portfolio to Continental Finance. The move is the latest in Oportun’s ongoing effort to streamline the company and improve profitability. 

The company did not disclose the dollar amount of the sale. 

The news was expected. CEO Raul Vazquez said during the San Carlos, California-based company’s second-quarter earnings call last month that Oportun had signed a nonbinding letter of intent with a buyer of its credit card business.

“The transaction will simplify our product portfolio and enhance our focus on our three core products: unsecured personal loans, secured personal loans and our award-winning Set & Save savings product,” Vazquez said on the call. The savings product stems from Oportun’s acquisition of savings fintech Digit in 2020.

The closing date is anticipated to be on or around November 10, rather than by the end of the third quarter as the company indicated in its second quarter earnings call. Due to the revised closing date, the sale is expected to be accretive by approximately $2 million to adjusted EBITDA in 2024 as compared to the $4 million previously indicated. Oportun continues to expect that the transaction will result in adjusted EBITDA favorability of approximately $11 million in 2025.

Continental Finance is a credit card company based in Wilmington, Delaware that services credit cards for consumers with FICO scores ranging from 300 to 689. Its portfolio includes several unsecured cards. 

In the recent earnings call, Vazquez gave several reasons to think the company’s overall performance is improving. For instance, its annualized net charge-off rate in the second quarter was 12.3%, 23 basis points better than last year’s level. Quarterly net charge-offs declined year-over-year for the third consecutive quarter. GAAP operating expenses were $109 million, down 20% year-over-year and adjusted operating expenses were $94 million, the lowest level in the last three years. The company was profitable for the second consecutive quarter on an adjusted net income basis at $3.2 million and drove a significant year-over-year improvement in adjusted EBITDA. 

In that same call, Vazquez also shared hope of growing the company through a lending collaboration with Western Union, the cross-border payment company. Oportun will pay for leads when loans that meet its underwriting criteria are funded. 

“This is a significant opportunity to add new applicants to our originations funnel and generate incremental new loan volume under our current credit standards,” Vazquez said.