Pagaya Technologies Ltd. (PGY Quick QuotePGY - Free Report) emphasized expanding bank partnerships and restoring lending economics on its third-quarter 2026 earnings call. Management highlighted its growing application pipeline and diversified funding sources as drivers of further network expansion.

Higher benchmark rates pressured transaction economics, even as loan volumes and profitability increased. Executives outlined pricing actions intended to improve margins into 2027.

Pagaya Targets a Recovery in Lending Margins

Chief financial officer Jonathan Dobres said fee revenue less production costs (FRLPC) declined to 4.1% of network volume, near the bottom of management's 4%-5% target range. Higher funding costs drove the compression.

Pagaya raised annual percentage rates by 100 basis points in personal loans and 140 basis points in auto lending during September and October. Dobres expects FRLPC to approach the midpoint of the target range in 2027.

A Stephens analyst questioned whether new partners also dilute margins. Dobres explained that newly onboarded programs initially produce lower FRLPC rates but approach mature-partner economics over time. President Sanjiv Das said activation rates remained stable following pricing increases.

PGY Sees Larger Banks Driving Its Partner Pipeline

Chief executive officer Gal Krubiner highlighted Citizens Financial Group and First National Bank of Omaha as new partners for personal loans and home improvement financing, respectively. Six partners joined during the first three quarters, exceeding the annual target of two to four.

Krubiner told a Jefferies analyst that the prospective partner pipeline expanded more than 50% year over year. Banks increasingly view Pagaya as a way to offer credit products while retaining deposit customers and generating fee income.

During questioning from Citi, Das said the pipeline increasingly includes large banks with greater lending potential. However, he maintained the annual onboarding target of two to four partners, citing uncertainty around closing timelines.

Pagaya Expands Applications Beyond Existing Loan Flows

Das said personal loans remained the largest lending category, while auto was growing faster. Auto application volume increased 40% year over year.

The company expanded its Affiliate Optimizer through Experian and Credit Karma and reported approximately 70 direct marketing campaigns. Das said those campaigns helped partners add more than 20,000 customers.

Management also described new auto tools designed to help lenders make counteroffers and optimize loan terms. Responding to Citi, Dobres said new partner conversion typically normalizes over roughly 12 months as Pagaya evaluates credit performance before increasing loan production.

PGY Diversifies Funding to Support Origination Growth

Das detailed more than $2 billion of committed capital arrangements, including a $700 million auto forward-flow agreement and $700 million in personal-loan variable funding note capacity. A revolving securitization also supports $850 million of production.

Dobres said Pagaya raised $3 billion through asset-backed securitizations during the quarter and expanded its investor network beyond 180 participants. He also cited tighter spreads in a recent personal-loan transaction.

A TD Cowen analyst questioned funding conditions. Dobres said roughly half of funding now comes from channels other than prefunded securitizations, compared with approximately one-quarter a year earlier, reflecting greater funding diversification.

Pagaya Maintains Expense Discipline and Raises Outlook

Dobres said core operating expenses were $45 million, continuing seven quarters of essentially flat spending. Adjusted EBITDA grew 22% to $130 million, while GAAP net income attributable to shareholders reached approximately $50 million.

Third-quarter adjusted earnings of $1.07 per share exceeded the Zacks Consensus Estimate of 96 cents. Revenue and other income of $390.49 million surpassed the $378.05 million consensus.

Pagaya raised its 2026 GAAP net income guidance for the third time, projecting $162 million-$182 million. It expects $1.45 billion-$1.5 billion in revenue and other income. Dobres said fourth-quarter network volume would decline seasonally and reflect Klarna's full departure from the network.

Pagaya Technologies Ltd. Price, Consensus and EPS Surprise

Pagaya Technologies Ltd. price-consensus-eps-surprise-chart | Pagaya Technologies Ltd. Quote

PGY Focuses on Measured Growth Through 2027

Krubiner emphasized partner adoption, lower funding costs and disciplined credit selection as priorities for the coming year. Management expressed confidence in expansion opportunities while acknowledging near-term margin pressures.

Executives also stressed that onboarding new institutions does not require proportional operating expense increases. Their focus remains on improving loan quality as the network scales.

Zacks Rank and Style Scores Signal

PGY carries a Zacks Rank #2 (Buy), indicating favorable near-term prospects under the earnings estimate revision-based ranking framework. Its Value, Growth and Momentum Style Scores are each A, reflecting favorable characteristics across all three investment styles. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The stock also has a VGM Score of A, combining these characteristics. The pairing of a top-two Zacks Rank with strong Style Scores is viewed favorably within the Zacks framework for potential outperformance over the next one to three months. However, the Zacks Rank can change as analysts revise earnings estimates following the reported results.