LAFDI market report - Friday 4th December

By Rupert Taylor on Friday 4 December 2015

Alternative Lending

   

Weekly return

LAFDI

1.06%

MSCI World

-2.75%

Top 5 performing Stocks in last week

1

ONDK US Equity

18.59%

2

CACC US Equity

8.55%

3

PAG LN Equity

8.37%

4

TUNG LN Equity

5.39%

5

PAY LN Equity

6.62%

Worst 5 performing Stocks in last week

1

NSM US Equity

-8.78%

2

GLIF LN Equity

-7.33%

3

TAXI US Equity

-6.35%

4

WEX US Equity

-4.92%

5

TREE US Equity

-3.64%

 

* Returns are calculated for the week to local market close on Thursday.

The LAFDI produced a chunky week of out-performance delivering a whopping 3.81% on a relative basis.  A large chunk of the sector may have taken some cheer from the move by JP Morgan to work with OnDeck Capital.  To see a banking giant of such colossal proportions partner with an alternative finance lender is a significant validation of the model. 

On Tuesday, JPMorgan, the biggest US bank by deposits, said it would break into online lending by signing an agreement to partner with OnDeck, a New York-listed lender to small businesses that has grown rapidly since inception in 2007.  Under a pilot project slated to begin in January, Chase, the main US banking unit, will offer loans to customers among its roughly 4m small-business accounts using OnDeck’s platform, which promises almost real-time approvals and same, or next-day funding. The product will carry Chase’s branding and the funds will come from its balance sheet. Jenn Piepszak, chief executive for business banking at Chase  explained “It is not a question of friend or foe,” referring to the competitive threat posed by the likes of OnDeck. “We clearly bring scale and customer acquisition to the table; what they offer is a disruptive customer experience that is very complementary with our existing services.”  Many in the market have focused on the ability of OnDeck to move faster to satisfy customer requirements using a superior technology platform, aswell as Chase inability to give significant attention to loans below a certain size.  However many disciples of disruption will recognize that there are likely other factors at play here.  Firstly OnDeck’s lack of branch network translates into a huge cost saving allowing keener borrowing rates and a better return for the capital at risk.  Secondly it seems that JP are giving validation to the technology lead approach to pricing credit which allows for more enlightened risk decisions. 

After a counter-intuitive reaction to good results last week Paragon Group PLC delivered a welcome return to form.  Strong results had been out-weighed by changes in the taxation of UK 2nd homes causing concerns about the companies exposure to the buy to let segment of UK residential property.  However concerns seems to have given way to an acknowledgment of strong results and a progressive dividend.

Please note – The LAFDI is now available on Bloomberg.  Tickers:

LAFDITR GO for the Total Return Index

LAFDIPR GO for the Price Return Index

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Companies in this Article:

OnDeck

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