Online lending stocks may have finally found the bottom, and now they're on the way back.
Shares of both Lending Club and OnDeck Capital shot up in trading Monday, respectively adding more than 7 percent and more than 3 percent. The moves come on a day when the broader banking sector is edging only slightly higher.
After a rough year for start-ups that channel cash to small businesses and consumers via the web, shares of lenders OnDeck Capital and Lending Club have risen recently, signaling shareholder optimism. A week after the financial technology, or fintech, stocks announced quarterly earnings, shares of both companies have risen more than 12 percent, and some say the worst has passed for the lenders.
A key metric is showing signs of improvement in each of the companies' quarterly earnings reports: originations.
Originations, or the new customers that the online lenders sign up, drive revenue higher and also help signify staying power for their business. After the Lending Club ousted its CEO over financial irregularities, resulting in a plunge in the company's stock, it still managed to increase originations in the second quarter, the company said last week. And origination fees are also a contributor to online lenders' revenue.
The same goes for OnDeck Capital — which saw its own originations rise a whopping 41 percent compared with the prior year. The lender has a partnership in pilot mode with JPMorgan Chase to market loans to its user base; once that program is fully online, it has the potential to pump up OnDeck's top line even more.