Goldman Sachs analyst report on UPST

I have not yet had time to read it but the full 32 page report is here, uploaded to a Google drive link:…


Have now read the full report. Some things to highlight:

“For pools of securitized loans, Upstart’s realized loss rates were only ~half of those predicted by Kroll, and over the same time period the realized losses for the same pool of loans were only on average 5% different than internal forecasts.” (This is consistent with my own look at KBRA data that I posted here recently)

“Post-COVID bank partner commentary. After significant origination reductions driven by COVID-19 in early 2Q, a number of Upstart’s bank partners, many of which work with numerous platforms in the unsecured personal lending space, noted that Upstart’s loans were significantly outperforming loan loss targets and were the most stable in terms of performance from February into late 2020 (per our channel checks). We expect that this stability has been crucial to Upstart’s reaccelerated originations results.”

“For both the onboarding and process (from rate request to borrower conversion), Upstart’s displayed effective APR & borrower costs relative to competitors is crucial to growth in origination volumes and efficiency of customer acquisition costs. Internal Upstart data suggests that each 100bp reduction in interest rate increases conversion by 15%.” (Wow!)

“More than 98% of Upstart’s loans (as of 2020) are sourced from customers acquired through Upstart’s marketing programs or organically from borrowers coming to through word of mouth.” (Bank partner sourced loans have a long way to grow…)

“Bank partners have the option to retain loans that meet their business objectives, while the vast majority of the remainder are sold to institutional investors through a variety of structures developed by Upstart. Structures include Whole Loan Sales and Pass-through certificates, and these loans may later be included in asset-backed securitization transactions to other institutional investors. Upstart went from working with just six institutional investors in 2015 to over 100 today. In 1Q21, 17% of loans funded through the Upstart platform were retained by the originating bank and 81% of the loans were purchased by institutional investors through the company’s loan funding programs.”

“Upstart’s 1,600 variables are significantly more than competing platforms per our checks of competing credit models, and while numerous Upstart studies suggest that this has created meaningful advantages for interest rate, loss rate, and borrower approval rate, we ultimately believe that the impacts of these improvements at scale within the unsecured personal loan category and in more efficient categories like auto and mortgage will take time to prove out, particularly given that Upstart’s AI models have not yet been extensively tested during down-cycle economic conditions or in categories outside of unsecured personal lending.” (I agree, skepticism will continue to abound about UPST for the continued near term. Only numbers from earnings reports can be relied upon)