OnDeck Capital reported a strong quarter surprising the market on originations and cost of funding. The weak spots are asset quality deterioration and poor prospects for cost of risk.

The launch is a natural extension of OnDeck's partnership efforts with banks which began three years ago. ODX is likely to help OnDeck crystallize value in its SaaS business and credit analytics by potentially attracting strategic interest in equity..

Operating leverage is working to LC's favor leading to growth in originations with margin gains and solid earnings. June quarter is indeed a strong beat. The downside risk, the elephant in the room, remains legal and regulatory.

Repricing of loan book late 2017 has started showing up in margins, which have beaten analysts’ June quarter estimates. The street is catching up but there is probably further upside risk to earnings. The shares are trading at compelling multiples.

Granting bank charters to enterprise fintech may be a good compromise for regulatory reasons. Yet, a bank charter to run a more competitive financial technology business is probably overstated as a commercial proposition.