By Daniel Lanyon on Friday 4 November 2016
The once beleaguered US platform Lending Club has seen an analyst upgrade ahead of its Q3 earnings call on Monday.
The past six months have been a troubled period for the US giant of marketplace lending, but analyst upgrades could suggest the worst may be behind the platform with an expectation that its Q3 earnings have recovered from a blip in the preceding quarter.
Lending Club has had a perilous 2016 with investors losing confidence suddenly in May due to allegations of impropriety in the underwriting of loans being prepared for sale to an institutional investor. The immediate result of the news was the resignation of its co-founder and chief executive officer at the time Renaud Laplanche and subsequently a major shakeup of its senior executive team in the following months as well as a plunge in its share price.
As a direct consequence, Lending Club suffered its biggest quarterly loss in the second quarter of 2016 prompting its chief financial officer Carrie Dolan to step down. The firm reported a loss of $81.4m, or 21 cents per share, for the second quarter of 2016 compared to a loss of $4.1m, or 1 cent per share, compared to the same period in 2015. In this period Lending Club saw its origination volumes decline by nearly 30 per cent compared to Q1 of 2016 although it was still marginally better than the second quarter of 2015.
Th stock price of Lending Club saw a bounce at the close of yesterday’s trading, however, of more than 5 per cent after analysts upgraded their expectations for its Q3 earnings.
Loan originations in the second quarter of 2016 were $1.96bn, compared to $1.91bn in the same period last year, an increase of 2 per cent year-over-year. The Lending Club platform has now facilitated loans totalling nearly $21bn since inception. The firm will report how the scandal affected their overall performance in the third quarter of 2016 on a Monday call to investors.
Lending Club claims to be the world’s largest online marketplace connecting borrowers and investors. It has lent $20.7n since its inception in 2006. In the second quarter of 2016 it originated $1.95bn.
It makes consumer loans, business loans as well as financing for medical procedures. In addition, it has moved into the car re-financing market with an announcement last week that the firm would be trialling in California with plans to go nationwide across the US in ‘early’ 2017.
“Tens of millions of Americans borrow over half a trillion dollars every year to buy cars,” said Scott Sanborn, CEO and president of Lending Club. “The practices and processes of the auto lending industry offer consumers limited options and a lack of transparency. This has created a gap between the rates consumers pay and the rates they might otherwise qualify for, unnecessarily driving up debt burdens. We are excited to leverage our technology and core capabilities to put thousands of dollars back in consumers’ pockets.”
Loans will range from $5k to $50k in size, with 2-6 year terms, and APRs ranging between 2.49 per cent and 19.99 per cent.