Magazine article American Banker

Slim E-Loan Profit Doesn't Worry Popular

Magazine article American Banker

Slim E-Loan Profit Doesn't Worry Popular

Article excerpt

The second-quarter earnings report that E-Loan Inc. issued Tuesday shed some light on what Popular Inc. will get when it buys the online lender.

E-Loan reported results less than a week after Popular, of San Juan, Puerto Rico, announced it was acquiring E-Loan for $300 million. And its profit of $409,000 illustrated just how volatile its earnings have been in its eight-year history.

Though the profit was more than double that of the year-earlier period, it was 81.4% less than the first quarter's, thanks to rising expenses. For 2003's second quarter, E-Loan reported an $8.1 million profit, and for that quarter in 2002 it reported earnings of $900,000.

In a telephone interview, E-Loan president and chief executive Mark Lefanowicz blamed its earnings volatility on the refinance boom and said it has diversified to "survive and thrive in any interest rate environment."

He said E-Loan is "really excited" to have broken even despite a $2 million surge in marketing costs to kick off an advertising campaign. Second-quarter results "put us back on track towards profitability in a non-refi environment," he said.

Richard L. Carrion, Popular's chairman, said in an interview Aug. 3 after the deal was announced that E-Loan's loan origination capacity, technology, and brand were what attracted him.

Popular plans to use the Pleasanton, Calif., lender as a springboard to originate more nonprime mortgages, auto loans, and even issue credit cards, which Popular has not done on the mainland for several years. Cost synergies, on the other hand, are "not what this is all about," Mr. Carrion said.

On Tuesday Popular's treasurer, Richard Barrios, said E-Loan's "overall results were not bad at all." The current interest rate environment makes it difficult "to generate the gains that were possible under a steeper yield curve," he said.

Mr. Barrios added that E-Loan "continued to invest in growing the business" and that Popular would do the same after the deal closes. …

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