- SoFi CEO Anthony Noto breaks down how the millennial-facing financial company is preparing for an environment with higher interest rates.
- In an interview with CNBC's Jim Cramer, Noto says his privately-held lender's "top priority" is quality over quantity.
Privately-held financial company SoFi isn't one of the non-bank lenders Federal Reserve Chairman Jerome Powell called out as potential risks to the U.S. economy in his Wednesday speech, SoFi chief Anthony Noto told CNBC on Thursday.
"We have really strong risk controls," the CEO told Jim Cramer in an exclusive interview on "Mad Money." "We take it very seriously."
Noto, formerly the chief operating officer of Twitter, said that when he joined SoFi — a CNBC Disruptor 50 company whose name stands for "Social Finance" — "the No. 1 priority was making sure that we focused on quality of loans over quantity of loans."
Knowing that the Fed would soon start raising interest rates in earnest, Noto knew that his millennial-facing company would have to adjust to ensure that the loans it made were secure and appropriately backed.
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"We wanted to focus on per-loan economics for two reasons: one, we wanted the loans that we created to be great investments for our asset-backed security investors, but also if we keep them on our balance sheet," he told Cramer. "So we made that pivot when I got to the company to ensure that we prepared for the longer-term rising-rate environment."
On Wednesday, Fed Chair Powell made a speech that amounted to a slight reversal from the central bank's position on interest rate policy in October. Rather than maintaining that interest rates were "a long way" from neutral, he said they were "just below" neutral, or the level when they are neither accomodative or restrictive to the economy.
He also said that the Fed had "no preset policy path" for its rate hikes, causing a 600-plus-point rally in the Dow Jones Industrial Average. Stocks continued their march higher Thursday before reversing at day-end on trade concerns.