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(Adds details from earnings call, share drop, context)
By Anna Irrera and Nikhil Subba
May 8 (Reuters) - On Deck Capital Inc shares fell 8 percent on Monday after the online lender said it was tightening credit requirements that it expects will lead to profitability in the long term but slow its growth this year.
Like it peers, OnDeck has been facing concerns from investors over the quality of its loans and its ability to sustain a fast pace of growth. It reported a slightly bigger-than-expected quarterly loss on Monday.
Chief Financial Officer Howard Katzenberg said on a Monday conference call to discuss the financial results that the stricter credit requirements would lead to a 20 percent drop in originations in the second quarter from the previous three months.
OnDeck also expects origination volumes to be lower this year than in 2016, Chief Executive Officer Noah Breslow said on the call.
"We have made the strategic decision to shift the company's near-term focus from growing loans under management to achieving profitability," Breslow said.
Reflecting the changes, the company lowered its full-year net revenue outlook to a range of $342 million to $352 million. It previously had forecast $377 million to $387 million.
Shares of OnDeck were down 8 percent at $4.27.
OnDeck is also aiming to slash annual costs by an additional $25 million, primarily by cutting staff by about 27 percent from levels at the end of 2016.
In February, the New York-based company, which runs a website that allows small businesses to secure loans from investors, had announced a plan to reduce costs by $20 million annually.
OnDeck also said on Monday that it would shift further toward funding more loans itself.
It expects loans funded by outside entities to account for only 5 percent of its originations this year, a change that means the company will have to set more money aside for potential losses, Katzenberg said.
OnDeck reported a first-quarter loss of 11 cents per share, excluding special items. Analysts on average were expecting a 10-cent loss, according to Thomson Reuters I/B/E/S.
Gross revenue rose 48.4 percent to $92.89 million on higher net interest income, beating analysts' estimates of $90.38 million.
Provisions for losses jumped 82 percent to $46.18 million, while funding costs nearly doubled to $11.28 million. Operating expenses rose about 5 percent to $46.68 million. (Reporting by Anna Irrera in New York and Nikhil Subba in Bengaluru; Editing by Arun Koyyur and Lisa Von Ahn)