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Anthony Noto's first shareholder letter as SoFi CEO outlines company values, growth areas

Key Points
  • In his first shareholder letter since becoming CEO, Anthony Noto said the SoFi at Work program more than doubled in the quarter.
  • Noto didn't address the company's recent sexual harassment scandal directly, but he said there's a new management team in place.
  • In the wealth management market, SoFi is growing but is still way behind the market leaders.
Anthony Noto
Abigail Stevenson | CNBC

SoFi CEO Anthony Noto, who left Twitter earlier this year to take over the online lender, has just sent his first quarterly letter to shareholders.

While he didn't address the sexual harassment allegations that led to the ouster last year of co-founder Mike Cagney, Noto did broadly discuss the establishment of "our mission and our company values."

But it's the growth of new products at SoFi that will most likely attract the attention of investors, as the company tries to justify its $4.4 billion private market valuation.

CNBC obtained the letter, which is dated May 11, from a source, and SoFi confirmed it is authentic.

In the letter, Noto said the SoFi at Work program, which partners with companies to help their employees pay off student loans and other debt, expanded its funded loan volume by 118 percent from a year earlier. The program, used by over 700 businesses, was launched in September 2016, so the growth is coming off a small base from last year at this time.

SoFi at Work added 30 partner institutions in the quarter, Noto wrote, "to offer student loan benefits (including employer contribution programs) and other financial wellness products to their employees and association members."

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Another new market where SoFi is gaining some traction is in wealth management, an offering announced last year to invest members' money in low-cost exchange-traded funds. SoFi said its assets rose by 31 percent over the fourth quarter, with a 39 percent increase in new accounts.

But SoFi, which ranked 45th on CNBC's 2017 Disruptor list, is still a tiny player in that market. According to its latest SEC filing, SoFi Wealth has $43.5 million under management, compared to over $10 billion at robo-advisor firm Wealthfront and $6.5 billion at Personal Capital.

Noto said the plan this year is to expand beyond robo-advisor services "to include access to individual securities as well as other asset classes."

In total, SoFi originated $3.6 billion in loans in the first quarter, up 27 percent from a year earlier, a number it first disclosed last month. The company said in the letter that it added about 59,000 members — primarily borrowers — in the quarter, bringing the total number close to 500,000.

'Growth vs profitability'

Noto, who was head of finance and then operations at Twitter during his three-and-a-half-year stint at the company, joined SoFi during a period of rapid growth but internal crisis. Cagney, who co-founded SoFi in 2011, stepped down in September, following sexual harassment allegations by a former employee and reports of a toxic culture and years of improper treatment of women by top executives.

Nino Fanlo, who had been SoFi's finance chief, left earlier in the year to join a biotech start-up, but he was also named in stories about the company's culture. Both Cagney and Fanlo have denied any wrongdoing, and Cagney launched a new fintech start-up this year.

Under Noto's leadership, SoFi brought in credit expert Michelle Gill as CFO and Rich Garside, a former Citibank executive, as global head of operations.

At the end of the letter, Noto said the company established a set of 11 values, including to "embrace diversity" and "take care of other people and help them grow."

"We have changed the leadership team to set the example amongst their teams and to help us devise the programs and practices that will reinforce these values in our everyday life at the company," he wrote.

While Noto inherited a big and growing loan portfolio, he's also had to take on some business challenges, like high marketing costs. Fast Company reported in March that in 2017 the company spent an average of $756 to acquire each customer, or close to twice what other online lenders like LendingClub spend.

Noto has to reel in expenses to get the company in a position to go public, especially as rising interest rates lead to a higher cost of capital for SoFi. In the letter, he listed "balancing growth vs. profitability" as one of his five key priorities for 2018.