Oportun, the online consumer lender, has entered into a definitive agreement to divest its credit card portfolio to Continental Finance. This strategic move is part of Oportun’s ongoing efforts to streamline operations and enhance profitability. While the financial terms of the deal were not disclosed, the announcement comes as no surprise to industry observers.
During Oportun’s second-quarter earnings call in August, CEO Raul Vazquez had signaled the company’s intentions, revealing that a non-binding letter of intent had been signed with a potential buyer for the credit card business. Vazquez emphasized that this transaction would allow Oportun to simplify its product offerings and concentrate on its core services: unsecured personal loans, secured personal loans, and the Set & Save savings product, which was acquired through the purchase of savings fintech Digit in 2020.
The sale is now expected to close around November 10, slightly later than the initially anticipated end-of-third-quarter timeline. Due to this revised closing date, the transaction’s impact on adjusted EBITDA for 2024 has been adjusted downward to approximately $2 million, compared to the previously projected $4 million. However, Oportun maintains its forecast of an $11 million favorable effect on adjusted EBITDA for 2025.
Continental Finance, the acquirer of Oportun’s credit card portfolio, is a Wilmington, Delaware-based credit card company specializing in servicing cards for consumers with FICO scores between 300 and 689. Their product line includes various unsecured card offerings.
In recent financial reports, Oportun has shown signs of improving performance. The company’s second-quarter results revealed an annualized net charge-off rate of 12.3%, marking a 23 basis point improvement from the previous year. This represents the third consecutive quarter of year-over-year decline in net charge-offs. Additionally, GAAP operating expenses decreased by 20% year-over-year to $109 million, while adjusted operating expenses hit a three-year low at $94 million.
Oportun achieved profitability for the second consecutive quarter on an adjusted net income basis, reporting $3.2 million and demonstrating significant year-over-year improvement in adjusted EBITDA. The company’s CEO also expressed optimism about future growth prospects, highlighting a new lending collaboration with Western Union. This partnership is expected to generate new loan applicants and increase loan volume while adhering to Oportun’s current credit standards.
The sale of the credit card business aligns with Oportun’s strategy to focus on its core strengths and improve overall financial performance. By streamlining its product portfolio, the company aims to allocate resources more effectively and capitalize on growth opportunities in its primary business segments.
As Oportun continues to evolve its business model, industry analysts will be closely watching the impact of this divestiture on the company’s long-term profitability and market position. The move reflects a broader trend in the fintech sector, where companies are increasingly refining their product offerings to maintain
competitiveness and drive sustainable growth.
The transaction with Continental Finance not only allows Oportun to shed a non-core business but also provides an opportunity for the company to reinvest in areas that align more closely with its strategic vision. As the financial services landscape continues to evolve, Oportun’s decision to focus on its core products may prove instrumental in navigating the challenges and opportunities that lie ahead in the competitive online lending market.