A granular decomposition of profitability by loan product, examining the full margin waterfall from gross interest income through cost of funds, expected credit losses, and operating expenses to arrive at risk-adjusted net returns.
Complete profitability waterfall by product. Personal loans generate the highest net margin (4.02%) despite elevated default rates, owing to their premium pricing. HELOCs offer the lowest risk-adjusted return but contribute portfolio stability through their secured, low-default profile.
| Metric | Personal | Auto | HELOC | SMB | Student |
|---|---|---|---|---|---|
| Avg. Interest Rate | 14.5% | 8.9% | 7.2% | 11.8% | 6.8% |
| −Cost of Funds | (3.2%) | (2.8%) | (2.5%) | (3.5%) | (2.2%) |
| Net Interest Margin | 11.3% | 6.1% | 4.7% | 8.3% | 4.6% |
| −Default Rate | (5.8%) | (2.4%) | (1.2%) | (4.6%) | (1.8%) |
| Loss Given Default | 72% | 38% | 25% | 55% | 85% |
| −Expected Loss | (4.18%) | (0.91%) | (0.3%) | (2.53%) | (1.53%) |
| −Operating Cost | (3.1%) | (1.8%) | (1.2%) | (2.9%) | (1.5%) |
| Net Margin | 4.02% | 3.39% | 3.2% | 2.87% | 1.57% |
| Risk-Adj. Return | 8.12% | 5.19% | 3.9% | 5.77% | 3.07% |
| Portfolio ($M) | $14.8M | $11.2M | $8.9M | $5.1M | $2.3M |
| Avg. Balance | $5,210 | $7,180 | $21,190 | $16,450 | $3,380 |
| Originations | 2,840 | 1,560 | 420 | 310 | 680 |
Grouped bar chart comparing the key margin components across products. The spread between NIM and expected loss is the primary driver of product-level profitability. Personal loans show the widest spread but also the highest volatility.
Scatter plot mapping each product's default rate (x-axis) against its risk-adjusted return (y-axis). Bubble size represents portfolio volume. Personal loans occupy the high-risk, high-return quadrant, while HELOCs anchor the low-risk, moderate-return position.
Analyst's Note: The profitability matrix reveals a clear risk-return tradeoff across the product portfolio. Personal loans, despite their 5.8% default rate, deliver the highest risk-adjusted return at 8.12% — well above the 5% target threshold. The 30% operating expense reduction achieved during the analysis period improved net margins across all products, with the most significant impact on the cost-intensive personal and SMB loan lines. Strategic recommendation: maintain the current product mix while exploring opportunities to shift marginal auto loan volume toward personal loans where underwriting confidence is high.