On the Road to Recovery? Lending Club Shrinks Quarterly Losses, Announces Major Loan Buyer

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Lending Club CEO Scott Sanborn Presents at Money2020Is Lending Club on the path to recovery, yet?

The marketplace lending company’s Q3 loss of of $36.5 million paled in comparison to the $81.4 million loss in the previous quarter, but the improvement is not as significant as it looks. That’s because Q2’s extremely poor showing was largely a result of the $35.4 million goodwill write-down of Springstone Financial and one-time “unusual expenses” related to an internal investigation into the previous CEO’s scandalous exit.

The $36 million loss is a far cry from the profit they turned in Q3 of last year however, but that spread is also deceiving. That’s because $20 million of it can be attributed to still more one-time costs related to Laplanche’s departure and an additional $11 million is due to incentives paid out to money managers to buy their loans. They stopped paying out incentives at the end of August.

Operating revenue grew 10 percent QoQ from $102.4 million to $112.6 million, but shrank by 2 percent annually from $115.1 million. 

The stock closed up 15% on the day, but it’s still down more than 60% from the IPO price. The day’s rally was bolstered in part by an announcement that a US subsidiary of National Bank of Canada, Credigy, agreed to buy up to $1.3 billion worth of loans through the Lending Club platform over the next twelve months. 

Loan originations grew marginally – $1.97 billion, up 1 percent from $1.96 billion in Q2, down 12 percent compared to $2.24 billion last year.

“I am very pleased with our performance in the third quarter. We actively reengaged with investors of all types to deliver on our plan and enable $2 billion in loan originations,” said Lending Club’s President and CEO, Scott Sanborn in a statement. “While we’ve made incredible progress, there is still work to be done. In the months ahead we are focused on increasing the diversity and resiliency of our funding mix, realigning our resources, and regaining our operating rhythm.”

At the Money 20/20 event last month, Sanborn announced that the company will foray into the $40 billion auto refinance market and said that he remains bullish about the company’s future in this new venture. The marketplace lender is offering loans in the range of $5,000 – $50,000 with APRs ranging from 2.49 percent to 19.99 percent for terms up to 72 months.

The third quarter has been an eventful one for the company which saw some management shuffle too. CFO Carrie Dolan was replaced by Thomas Casey, former CFO at the medical device company, Acelity. And, citing high delinquencies, the company also raised interest rates by a weighted average of 26 basis points, with high a concentration on F and G grade loans, in October.

One major cause for concern, however, remains to be the thinning retail investor base. While the company expanded its investor base to 142,000 active individual investors, investment was down to $273 million in the third quarter, from $327 million in Q2.

Last modified: November 7, 2016

Category: Marketplace Lending

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