Marketplace lending in the US seems to be back on track, as Prosper returns to growth.
Consumer loans marketplace Prosper – and perhaps the US marketplace lending space more generally – appears to have emerged from its year-long malaise. Prosper released results for the second quarter yesterday, highlighted by significant origination growth. The company has also taken the next step in its planned programme of securitisations.
Prosper’s originations came in at $775m for the quarter, up 32 per cent quarter-on-quarter and 74 per cent year-over-year. It was during the second quarter of last year that the marketplace lending sector was engulfed by scandal when Renaud Laplanche was ousted from LendingClub.
Prosper’s results for the second quarter cap off a string of heartening updates from the major players in the US. LendingClub, OnDeck and SoFi – arguably the three biggest players alongside Prosper – have each drawn positive coverage on announcing their results. Each of the consumer lenders has reported origination growth, while a slight slowdown at small business lender OnDeck has been attributed to its decision to tighten its credit management.
Prosper’s transaction fee revenue grew 32 per cent quarter-over-quarter and 84 per cent year-over-year. The company reported a net loss of $41.4m for the quarter, up around $6m from the prior year period. However, this includes “$39.3m in non-cash charges related to warrants to purchase preferred stock that were issued to a consortium of investors, and a third party in connection with a settlement agreement”.
A key milestone in Prosper’s road to recovery came in February this year, when it secured a $5bn loan purchasing agreement with a consortium of investors which included affiliates of New Residential Investment Corp., Jefferies Group LLC and Third Point LLC, as well as an entity which is principally managed by Soros Fund Management LLC. Part of the deal was that the group would earn an equity stake in Prosper over time, depending on the amount of loans that it purchased.
Prosper generated $8.6m of net cash from operating activities in the second quarter, and posted an adjusted EBITDA of $6.7m.
“We are very pleased with our second quarter results which demonstrate our ability to generate positive operating cash flow as we grow loan originations and transaction revenue with disciplined expense management,” said David Kimball, CEO of Prosper Marketplace. “Our growth was driven by strong interest from borrowers, our partnership with a consortium of investors, and innovations from our talented team.”
In tandem to the results comes the news that the Prosper Marketplace Issuance Trust has closed its second securitisation. The $500m securitisation is said to have been priced tighter than the vehicle’s premiere transaction, a $450.5m deal that got away in May. Close to 45 unique investors have participated in the two transactions.
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