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Author Topic: LC interest rates updated 5/8/2018

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LC interest rates updated 5/8/2018
OP: May 07, 2018, 11:00:00 PM
LC adjusted interest rates today, but the adjustments are shockingly TINY and therefore meaningless.  Can you believe they increased some rates by 0.12% ?   ZERO POINT ONE TWO.  You can just barely see this on the chart if you look really hard. 

The 8k filed with the SEC today describes it this way "Effective May 8, 2018, interest rates on the LendingClub Corporation ("LendingClub") platform have been updated. The changes are an increase of 0.12% for loan grades A2-A5, 0.15% for loan grades B1-B5, and 0.45% for loan grades C1-C5."

My updated chart...


The red dots on the A1 line are just there to highlight the dates at which LC made interest rate changes in any grade.
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LC interest rates updated 5/8/2018
#1: December 31, 1969, 07:00:00 PM
Morning Fred,

I always appreciate your thought out view points. I had a few questions if you are so inclined to answer:

1-What would you have expected them to raise the rates to?

2-Are the increases good or bad for: (A) the stock price (B) the investor who funds the loans (C) the borrower?

Thanks

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T
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b
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LC interest rates updated 5/8/2018
#4: December 31, 1969, 07:00:00 PM
Banks are likely interested because they can easily buy a geographically diverse portfolio of consumer debt that even at LC's current yields is above their average earning asset of 3.73%, and above the average consumer focused bank's average rate on earning assets of 4.02% (and those are gross yields, before financing costs and bad debt expenses).

https://www.fdic.gov/bank/analytical/qbp/2017dec/qbp.pdf

Leveraged up with ultra low rate deposits, and they can get a very nice Return on Equity from the A grade notes (the increase would add nearly a full point to bank RoE). 
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LC interest rates updated 5/8/2018
#6: December 31, 1969, 07:00:00 PM
From LC's most recent quarterly report A grade originations were up 97% year over year! B was up 38%.
LC is certainly catering to bank's appetite.

C was down 9%. A year ago there were far more C originations than any other grade (about 2.5 times A grade).
Interestingly, D grade was up 28% while E, F and G were down 28%, 57% and 75% respectively.

The standard loan program is 76% of LC's originations.

The times they are a'changin!


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