JP Morgan Deal With Santander Shows Nothing To Fear From Lending Club Loans

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Lending Club IPOAfter Santander Consumer USA Holdings Inc. [NYSE: SC] announced they were trying (almost desperately it seemed) to shed $1 billion worth of Lending Club [NYSE: LC] loans from their balance sheet, investors weren’t sure if was the loans themselves that were a problem or if there was something else going on.

Santander CEO Jason Kulas said back in October that, “although the personal lending portfolio is performing well, we no longer intend to hold these assets for investment.” The rationale was that they would refocus their efforts on subprime auto lending. The market didn’t take the news well and rewarded Santander by gutting the share price from $22.10 on October 28th down to $10.10 by February 1st.

In a report put out last week by Chris Donat, a company analyst at Sandler O’Neill & Partners, it was intimated that the Lending Club loans Santander was still holding may have contributed to the fourth-quarter loss of $232 million that they reported last week on its unsecured personal loan portfolio. “In light of the damage that the personal loan portfolio inflicted on Santander’s income statement in 4Q15, we will be relieved when Santander is out of this business,” Donat wrote.

But fears of possible toxic Lending Club loans subsided on Monday when the WSJ announced that JP Morgan Chase was acquiring Santander’s portfolio and at a “premium.” The average FICO score of those loans is reportedly around 700. “The sale was being closely watched by credit markets as an indicator of the health of the market for online personal loans,” the WSJ said.

Lending Club’s share price closed up 3.12% on the news, but is still stuck near its all time low.

Last modified: February 2, 2016
Sean Murray

Category: Marketplace Lending, p2p lending

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