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Prosper Breaks $10 Million and Lending Club Keeps Rolling On

by Peter Renton on January 31, 2012

Both Lending Club and Prosper have started out 2012 strongly. In January Prosper broke $10 million for the first time and achieved an all time high in new monthly loan originations beating their previous high of $9.6 million set in May 2008. Lending Club had an amazing month with most days originating more than $2 million in new loans.

Lending Club Issues $34 Million in New Loans in January

Just seven months ago Lending Club broke $20 million in new loans for the first time. This month they came in at more than $34 million. They also issued far more loans than ever before: 2,622. All in all it was yet another very strong month.

The one statistic that I was somewhat surprised about this month is that the average loan size went down. In December the average loan was $13,678 (an all time high), but this month that dropped down to $12,967. I am surprised about this because Lending Club announced in late December that they were waiving service fees on large loans. I don’t know how that promotion has gone but I was thinking the average loan size would have increased because of it.

Lending Club has now originated $494 million in new loans since they started in 2007 and later this week they should cross over $500 million. Their 18-month loan volume chart is below – the black line is the three month moving average.

Lending Club 18-month p2p loan volume through January 2012

Prosper Records Their Best Month Ever

What a difference a year makes. A year ago Prosper had just completed their first full month without the auction system. There were few loans on the platform and they did a paltry $3.3 million in new loans. On this very blog some people questioned whether they would survive the year. Not only has Prosper survived but they are thriving with a good war chest of cash and rapidly growing loan volume.

As usual worth-blanket2 lead the way with an investment of $2.6 million in January (according to Lendstats). But this month worth-blanket2 was not alone in investing a seven figure sum. Another institutional investor made a big splash this past month.

We first learned of intelligent-repayment8 back in September. Since then they have been steadily investing a couple of hundred thousand dollars a month, certainly nowhere near the volume of worth-blanket2. But in January this all changed. They changed their screen name to Index_Plus and proceeded to invest over $2 million in new loans – not far behind worth-blanket2. It will be very interesting to see if this increased volume continues. But it is clear that Prosper wouldn’t have broken $10 million in January without this big bump from Index_Plus.

Below is Prosper’s 18-month loan volume chart.

Prosper 18-month p2p loan volume through January 2012

{ 18 comments… read them below or add one }

Bryce M January 31, 2012 at 8:16 pm

Awesome. Bring on the quarterly statements. I am eager to see how LC’s efficiency ratio came in.

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Peter Renton January 31, 2012 at 10:00 pm

@Bryce, I would expect to see that efficiency ratio to continue to improve as their volume increases. Just on originations alone they will be bringing in a lot more income.

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Marc February 1, 2012 at 8:54 am

I’m hoping the growth is due to P2P lending being more accepted and recognized. This bodes well for both lenders and investors. Looking for the next inflection point to see what part of the S curve we are on.

Thanks for the post.

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Peter Renton February 1, 2012 at 2:21 pm

@Marc, I agree that this bodes well. I am hoping we are sitting here this time next year and both companies are doing around double what they are doing now. Then Lending Club should be profitable and Prosper should be getting close. At the same time, they need to continue to provide good returns for investors.

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Dan B February 1, 2012 at 3:40 pm

Wow, I was wrong. It looks like Lending Club is going to cross the $500 million tomorrow Feb. 2nd before lunch & not after lunch like I previously predicted. :)

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Peter Renton February 1, 2012 at 5:43 pm

@Dan, It was a huge day today at Lending Club, nearly $5 million in new loans – one of their biggest days ever. I agree, they should break $500 million by early tomorrow morning.

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Ryan February 2, 2012 at 5:54 pm

I am a little concerned by the large portion of Prosper’s business that is done by just a few lenders. If these lenders slow down their rate of investment, Prosper’s numbers (and forecast) may look entirely different.

On the other hand, perhaps Prosper’s strategy is to get more big lenders lined up.

Do we have access to see how much of Lending Club’s business comes from the top few lenders?

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Peter Renton February 2, 2012 at 6:52 pm

@Ryan, Prosper is certainly focused on increasing the number of institutional lenders on their platform while at the same time growing their retail base. But the institutional side is probably already over 50% of their volume so I would like to see more retail investors on the platform too.

Lending Club does not provide a breakdown like Prosper does. And even Prosper doesn’t provide a break down of institutional/retail investors – we have to work that out for ourselves. I use Lendstats.com to look at who is investing the most in Prosper each month. Lending Club provides no information whatsoever in the data download regarding individual investors.

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Dan B February 3, 2012 at 3:05 am

Well I think it’s pretty clear that there isn’t that much non-institutional investing going on at Prosper. One only needs to look at the struggle that the loans that don’t get institutional attention go through to get funded to get a good picture. And considering Prosper’s $6k+ average loan size, the extent of the struggle is quite telling. Also realize that the institutions aren’t really taking the cream of the crop of loans either. Look at worth-blanket’s portfolio & it’s a virtual proxy for Prosper across the board. So it’s not that the retail investors are passing on the scraps. It’s that there isn’t that much retail investor activity period.

Look at it another way………….Up until recently I had an account at Prosper. At it’s peak it was less than 5% of my total p2p investments. I know 7 other p2p investors that have accounts at both Lending Club & Prosper. None of them have more money invested in Prosper. And the difference isn’t even close. That is saying something considering Prosper has been around longer.

Not counting newly opened accounts, does anyone here with more than $10k invested (& who has accounts at both companies) have more money invested in Prosper than Lending Club? I know Peter doesn’t.

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Peter Renton February 3, 2012 at 1:56 pm

@Dan, That is a fair question. Why is it that Lending Club seems to attract more retail investors than Prosper? I don’t see Lending Club’s marketing as being superior to Prosper’s although I don’t think their aggressive stance against Lending Club has done them any favors with investors. Also, one could argue, by doing research on Lendstats, that Prosper has better returns than Lending Club. So why fewer investors? I think there are a number of possible explanations:

1. Investors in Prosper 1.0 were burned and these people have not returned. The bad publicity surrounding the returns initial investors also impacts retail investors.

2. The interest rate mix is more aggressive at Prosper. According to Nickel Steamroller the average interest rate since the beginning of 2012 at Lending Club is 12.19% and at Prosper is 22.07%. That is a big difference and I think most retail investors are more comfortable investing in lower interest loans.

3. Lending Club is in a much stronger position financially than Prosper. With the volume that Lending Club is now doing, you can see that they will achieve profitability some time soon and I think that is comforting to many investors. Prosper still has a long way to go to get to Lending Club’s numbers.

4. On a related note, I think people are more comfortable investing with the industry leader and Lending Club is now definitely that.

As to your other note, yes I have more investments in Lending Club than Prosper right now but that is changing. By the end of the year I expect my investments will be roughly equal in both companies. I continue to believe an investment in both companies is the best way to invest in p2p lending.

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Dan B February 3, 2012 at 2:47 pm

Peter……..Actually I didn’t ask that question, because I know why Lending Club attracts more investors, retail or otherwise. But I do wish you’d resist the urge to be an apologist for Prosper. The sooner they are faced with the many below par things they’re doing the better for everyone involved. And as for returns, yes one could argue that they’re doing better than Lending Club but then one would be wrong. The key word that is missing is “interim” results Peter, interim results. In every other historical & complete metric, they’re not doing better & the future is far from certain. But then you know that.

As for reasons……….I could add another 5-6 to your list. But most of it all comes back to one thing………..a well deserved lack of CREDIBILITY.

Get ready to say hello to Glenn from Prosper everyone :)

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Ryan February 3, 2012 at 3:05 pm

I have had a Prosper account since 2006. Based on Lendstats, my ROI has been decent despite Prosper’s early struggle (Investing mostly in A,B,C,D). I excluded 2010 and 2011 because I don’t like to have a lot of the data come in before assuming my results.
2006 4.1%
2007 -4.7%
2008 6.2%
2009 13%
I recently opened up a Lending Club account only because I am concerned about Prosper getting to profitability (Peter’s #3 explanation). Other than this concern, I am quite satisfied with Prosper.

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Peter Renton February 3, 2012 at 4:29 pm

@Dan, I don’t consider myself an apologist for Prosper, I just call things as I see them. Now, as you know, I am a glass half-full kind of person, so I feel that both Lending Club and Prosper have a great future.

As for interim results you are dead right – I should have said that the interim results of Prosper in 2009-2011 appear to be producing higher returns than the interim results from that period of Lending Club. It is obvious to all that when only looking at completed loans from the periods before 2009 that Lending Club is indeed trouncing Prosper in returns.

One last point, I think you will agree that credibility is a subjective thing and you have made your opinions well known. But I have no such concerns with Prosper and that is why I will continue to argue for them. Some investors agree with me and no doubt many agree with you as well.

@Ryan, I think anyone who achieved a positive return in Prosper 1.0 has done a very good job. In hindsight it was very smart of you to avoid the E and HR notes because they are the ones that provided the biggest losses. Well done.

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Dan B February 3, 2012 at 7:41 pm

Ryan…………..Of course you realize that your 2009 results are extremely “interim” because zero of your 2009 loans (except early pays) have reached completion, right. It’s rhetorical because I know that Prosper didn’t issue any loans in 2009 until August of that year. Therefore none of those loans will complete their 3 years until at least August of this year. Of course you didn’t mention how much you invested each year etc…………

But even if we were to take your 2009 numbers as a “final” number, your average annual returns are around 4.5%. So yeah I think you’ve done great in terms of weathering the early storms. But I can almost guarantee you that 11 months from now your 2009 numbers will not be as eye popping as they are today.

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Peter Renton February 6, 2012 at 12:45 am

@Dan, I wouldn’t say his 2009 results are “extremely” interim. There were no 60 months notes back then so he has received at least 70% of the principal back on all loans. Now, if a loan defaults it will have a negligible impact on his ROI. With all the interest payments most of the notes that I have from 2009 are getting very close to break even. Now, Ryan’s 13% return will likely drop some, but I very much doubt it will get below 11%.

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Ryan February 6, 2012 at 10:43 am

@Dan, I’ve been investing in small loans (generally, less than 5,500), and in my experience, they often get paid back early. Over 50%, have already been paid back in full. I have two loans that keep flirting with the 30 days late line, but they each only have about $5 outstanding principle.

Also, as you alluded to, my loan volume isn’t particularly high so there is some good luck in those numbers. I doubled my loan volume in 2010 and again in 2011. I am very excited to see where 2010 will come in.

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RAS March 4, 2012 at 6:49 am

anyone have thoughts re: the pro’s and cons of having an account at Lending Club And Prosper?

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Peter Renton March 4, 2012 at 11:02 pm

@RAS, I always recommend investors open an account at both companies because it provides better diversification of your p2p lending investment. Lending Club has, on average, has borrowers with better credit scores and with Prosper you can get access to higher risk borrowers that pay more interest. To give you an idea of what I mean the average interest rate on Lending Club during the first two months of 2012 was 13.3% but at Prosper it was 19.3%. Diversifying between the two platforms will allow to spread your risk among a broader cross section of borrower.

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