(Adds details from call)
By Nikhil Subba and Anna Irrera
May 8 (Reuters) - OnDeck Capital Inc reported a better-than-expected quarterly adjusted profit on Tuesday, as the small business lender set aside less money for bad loans and costs fell.
The company now expects a full-year 2018 profit of up to $10 million, from its previous forecast ranging between a loss of $2 million and a profit of $10 million.
"On our last earnings call, we set our 5 strategic priorities for this year. Grow responsibly, strengthened credit management, invest in high-growth areas, enhance our product offerings, and drive operating leverage," Noah Breslow, OnDeck's chief executive, said on a call with analysts. "Our first quarter results demonstrate progress in each of these areas."
Shares were up 2.7 percent at $5.59 in early trading.
Like others in the online lending sector, New York-based OnDeck has faced concerns from investors over loan quality and rising default rates.
A year ago, the lender tightened credit requirements and slashed costs, moves it expected would lead to profitability in the long term but slower growth in the short term.
Operating expenses in its first quarter through March fell about 5 percent to $44.6 million. Provisions for loan losses fell 21.4 percent to $36.3 million, while funding costs increased 5 percent to $11.8 million.
Originations rose 3 percent to $590.6 million in the first quarter.
OnDeck lends money to small business through its website and then sells the loans to institutions such as banks.
It also provides its technology to banks such as JPMorgan Chase & Co, looking to lend to small business online.
It expects to announce a partnership with another large bank this year, Breslow said.
"Our conviction in the opportunity to market our platform to banks is improving, as banks are increasingly looking to digitize their originations processes," Breslow said. "From a macro perspective the U.S. economy is robust and small business confidence is at highest level in the years."
Net loss attributable to common shareholders narrowed to $1.9 million, or 3 cents per share, in the quarter ended March 31, compared with a loss of $11.1 million, or 15 cents per share, a year earlier.
On an adjusted basis, OnDeck earned 8 cents per share, beating analysts' average estimate of 4 cents, according to Thomson Reuters I/B/E/S.o
Net revenue rose to $42.2 million from $35.4 million. (Reporting by Nikhil Subba in Bengaluru and Anna Irrera in New York; Editing by Shailesh Kuber and Bernadette Baum)