NY Times Yesterday - Lending Club, Middleman for Small Loans, Plans Stock Offeri

[gamassey]

http://dealbook.nytimes.com/2014/08/27/lending-club-leader-in-peer-to-peer-plans-i-p-o/" class="bbc_link" target="_blank">http://dealbook.nytimes.com/2014/08/27/lending-club-leader-in-peer-to-peer-plans-i-p-o/

From the article:
From the start, the company has focused on relatively safe loans, using advanced computer algorithms that measure borrowers' creditworthiness. Customers with a FICO score of at least 660 can borrow up to $35,000 for three- or five-year loans. That is largely the kind of lending that big global banks have shied away from, since they are too small to pay meaningful profits.

Yet for Lending Club, the enterprise can prove lucrative. While rates on loans can start at below 7 percent, the average interest rate is about 14 percent, which still remains below standard credit cards. (The lenders can choose how risky of a loan they want to underwrite.) The company takes a small cut of that percentage and pays the rest to investors in the loans.

The demand for peer-to-peer borrowing has propelled Lending Club's expansion in recent years. It originated $1.8 billion worth of loans in the first six months of the year, more than doubling what it did in the same time last year.

Its revenue surged 134 percent, to $86.9 million. And its adjusted earnings before interest, taxes, depreciation and amortization which excludes some noncash charges, rose 55 percent, to $5.9 million.

But marketing expenses and the costs of growth have weighed on the bottom line. The company slid to a $16.5 million loss in the first half of the year from a small $1.7 million profit in the same time last year.

Still, the promise of the peer-to-peer industry has attracted some of the very institutions that Lending Club and others have sought to displace. Drawn by the promise of returns as high as nearly 9 percent, big mutual funds and hedge funds have flocked to help fund loans on these online marketplaces.

So popular has peer-to-peer lending been among big institutions that Lending Club and its competitors have had to put limits on how many loans they can buy, as well as how quickly they can bid on coming loans.

The presence of Wall Street is also on its board, which includes Lawrence H. Summers, the former Treasury secretary; John J. Mack, the former chief executive of Morgan Stanley; and Mary Meeker, the venture capitalist and onetime star Internet analyst.