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Aug 7 (Reuters) - Shares of OnDeck Capital Inc rose as much as 17 percent on Monday after the online lender said it had made progress on a plan to cut costs and improve the credit profile of its borrowers, and expects to reach double-digit loan growth again by next year.
OnDeck gave the upbeat outlook in its second-quarter earnings report.
Like other online lenders, OnDeck has faced concerns from investors over the quality of its loans and its ability to grow at a fast pace. Shares of the company have fallen more than 75 percent to $4.93 since its listing in December 2014.
To address these issues the company began tightening credit requirements and cutting expenses, which led to slower growth.
In May, OnDeck said it would slash annual costs by $45 million, mainly by cutting headcount by about 27 percent. .
The company has implemented most of those planned changes and expects to return to "double-digit" growth in 2018 despite reporting a 21 percent decline in loan originations in the second quarter, Chief Executive Noah Breslow said on a conference call with analysts. OnDeck is also on track to become profitable by the end of 2017, he said.
"The down shift in originations volume in the second quarter was entirely of OnDeck's doing," Breslow said. "That's also what gives us some of the confidence in terms of the second half of the year in terms of ramping originations back."
Overall, OnDeck reported a net loss of $1.49 million, or 2 cents per share, in the second quarter, narrower than a loss of $17.9 million, or 25 cents per share, a year earlier.
On an adjusted basis, it earned 2 cents per share, compared with the average analyst estimate of a loss of 1 cent, according to Thomson Reuters I/B/E/S.
Gross revenue rose 25 percent to $86.7 million. The company expects gross revenue of $82 million to $86 million in the third quarter.
OnDeck also said it has extended its small business loan partnership with JPMorgan Chase & Co for up to four years. Banks have been entering the online lending market by either partnering with young technology companies, such as OnDeck and competitor Kabbage Inc, or building their own platforms.
Breslow said that it was looking at new types of lending products for small businesses to launch next year as it looks to drive more long-term growth. (Reporting by Anna Irrera in New York and Nikhil Subba in Bengaluru; Editing by Lauren Tara LaCapra, Paul Simao and Frances Kerry)