Today Lending Club announced their first quarter earnings for 2015. The big focus on Lending Club has been rising expenses which was addressed in the call. Sales and marketing expenses as a total of originations have decreased from 2.16% to 2.04% year over year due to channel efficiency. In Q1 2015, they crossed the $1.5 billion mark in originations with over $1.6 billion for the quarter. This is an increase of 107% year-over-year with last year coming in at $791 million for the same time period. Total loan originations are sitting at $9.2 billion, which means we will see them cross the $10 billion mark next quarter.
I had heard the rumor a few weeks back but did not immediately believe it until a reader sent me these pictures showing a Lending Club drone prototype during a test flight in the Presidio in San Francisco. If confirmed, the program could have a major impact on this industry, following in the footsteps of Amazon’s drone program for delivering packages that was announced last year.
The sighting above was not the only one and we heard that the prototype has successfully flown around San Francisco making test deliveries.
When I first heard of this new program I wasn’t sure it was real so I reached out to Renaud Laplanche, the CEO of Lending Club, to get confirmation. While Renaud declined to comment, we were able to independently confirm the existence of the program and gather more information about how the program will work. When a borrower applies for a loan they will be able to choose whether they want a transfer to be made into their bank account or delivery of cash via the Lending Club Loan Drone. If a borrower chooses the Loan Drone option then once the loan is approved and funded the cash will be counted and loaded on to the Loan Drone for delivery.
Unfortunately, you will not likely see a Lending Club Loan Drone flying in your neighborhood any time soon because they have to apply to the Federal Aviation Administration for permission. That process could take years but sources told me that Lending Club is committed to making this an option for borrowers as soon as possible.
A Compelling Move by Lending Club
Taking advantage of tax deferred earnings is extremely important in building wealth for retirement. The tax savings over the course of a career can become substantial. When it comes to p2p lending, there are a few aspects that make having your p2p lending allocation in an IRA especially appealing. Lend Academy readers who follow Peter’s returns are well aware that most of his accounts reside in an IRA.
The timing of this post comes as the April 15th deadline approaches for making an annual contribution for 2014 to either a traditional IRA or a Roth IRA. This deadline does not apply to 401(k) rollovers or IRA transfers. In this post, I’ll first review what makes investing in a peer to peer lending IRA so powerful and discuss the process of opening an account with Lending Club and Prosper.
Investors who are looking into investing in p2p lending often bring up the poor tax treatment as a downside to the asset class. This is a valid argument as interest payments are taxed as ordinary income and charge-offs are capital losses. The higher your tax rate is on earned income, the less attractive p2p lending returns are for the investor. In addition, deducted losses are maxed at $3,000 per year, unless you have capital gains to offset losses. For larger investors, this is another downside to a taxable p2p lending account. For more on p2p lending tax treatment, you can read our 2015 tax information post. [Read more…]
[Disclaimer: I am not an accountant nor am I qualified to provide tax advice. This post merely shares how Lending Club and Prosper are presenting their tax information this year. You should seek professional advice before taking action on any of the ideas presented here.]
When it comes to taxes and p2p lending, things can get quite complicated. This is especially true for new investors as it can be overwhelming to see many unfamiliar forms. The length and amount of forms you have available to download can vary depending on when you began investing and any losses you incurred. There can also be recoveries, which further complicates things. This post will help Lending Club and Prosper investors find the information they need to file taxes for 2014.
Lending Club Taxes
Lending Club has provided an eleven page tax guide, which is much more detailed than last years. I have to give Lending Club a lot of credit for providing a useful tax information guide. It can be found in the tax statements section of your Lending Club account. Otherwise, you can download it from this direct link. The guide explains which accounts will receive certain tax forms, which are outlined below. These statements should all be available in your account as of January 31, 2015. [Read more…]
Lending Club held its first earnings call announcing Q4 2014 earnings results. The stock has had incredible swings since the original IPO price of $15. The stock opened 56% higher on its debut and eventually reached a high of $29.29, only to eventually fall to a low of $18.30. It closed today at $23.65 before earnings.
Beating analysts predictions, Lending Club announced Q4 2014 revenue of $69.6 million and an adjusted EPS of .01. An average of revenue estimates were projected to be $66.67 million with an EPS of .01. Lending Club originated $1.415 billion worth of loans, compared to $698 million last year. This is an increase of 103% year-over-year. Q3 originations were $1.165 billion, which shows Lending Club’s consistent origination growth we’ve been accustomed to seeing.
The theme of this earnings call is that they are investing heavily in the company. They have solid EBITDA margins, but Renaud stated that long term margins could reach 40%. Below shows their EBITDA margins over time.
Lending Club provided the below information regarding the standard program originations by investor type and originations by program. I believe institutional investors are being under represented since standard program originations don’t include investors in the custom program loans. These loans are not available directly on the marketplace. Custom program loans make up 22% of the loan volume as of December 31, 2014 and would include products such as small business loans, medical loans and their super-prime loans. [Read more…]
One of the most popular features for readers is my quarterly returns post. I have been sharing the details of my Lending Club and Prosper returns since the 4th quarter of 2011 and I will continue doing so.
While the principle of transparency seems to be less important at the major platforms these days here at Lend Academy we are still very much committed to it. So, every quarter I will share the details of all my P2P lending investments and show you how I am doing.
This past quarter brought several changes to my portfolio. I added two new investment accounts that now brings my total to ten separate investments. I admit this is a little excessive but if you read the details below you will understand why I have added two new accounts. Before we do that, though, let’s get right to the numbers.
Overall P2P Lending Return Now at 11.11%
My overall returns, while still solidly in double digits, continue to slowly decline. The returns for my core six holdings, each one has been open for several years, has dropped below 10% for the first time since I started investing more aggressively. There are two reasons for this: more defaults and lower average interest rates. Both Lending Club and Prosper continue to reduce their interest rates in order to attract more borrowers, so it is becoming more difficult to achieve those 10-12% returns that many of us have become accustomed to for the last several years.
Now on to my numbers. Click the table below to see it at full size.
As you look at the above table you should take note of the following points: [Read more…]
Many folks find it valuable to learn how others are investing on both Lending Club and Prosper, especially when they are first getting started. Many strategies are discussed on the Lend Academy forum. I thought I’d share how I am specifically investing in both Lending Club and Prosper. My strategies have changed over time and I am currently using one automation/analytics tool with third party credit models. As you read this, keep in mind that I have a relatively small amount in my p2p lending accounts with around $20,000 invested. This certainly has an effect on investment strategy.
None of this information should be considered investment advice and I do not recommend you follow my strategies. You should consider your own situation and risk tolerance before making investment decisions.
Automation/Analytics Tool Choice
I have written at length about all of the sites for analytics and automation tools. I personally use Nickel Steamroller for everything and there are a few reasons for this. I view it as an all-in-one tool. This means that with one account, I can do portfolio analysis, detailed backtesting and automation. They also support both Prosper and Lending Club for all of these features, which makes it easy to keep track of multiple accounts. [Read more…]
Today, Lending Club announced a partnership with BancAlliance, a consortium of 200 community banks with assets ranging from $200 million to $10 billion. Similar to the bank partnerships Lending Club already has in place these banks will be investing in consumer loans originated by Lending Club, loans that they don’t want to or couldn’t afford to make themselves. They will also be sending their own customers and prospective borrowers to Lending Club.
According to the Wall Street Journal one of these community banks, Sugar River Bank in Newport, N.H., will be committing $5 million to this program:
At the end of 2014, Sugar River Bank’s loans to individuals totaled $1.4 million, or less than 1% of its $261 million in assets. Now the bank is committing $5 million for individual loans through the Lending Club deal by purchasing the loans of borrowers who apply through the Lending Club website. Sugar River Bank makes mostly real-estate and small-business loans, but doesn’t have enough demand to justify a large program for evaluating borrowers with different credit histories.
What this does is further cement Lending Club, and this industry in general, as a way for banks to partner to grow their business. For any bank without a significant credit card portfolio this is becoming a no-brainer. Smaller banks can now do what they used to do for most of the 20th century: make personal loans to people in their community.
On the flip side this gives Lending Club many of the benefits of a branch network without any of the costs. Consumers will soon be able to walk into banks all over the country and apply for an unsecured consumer loan that will be underwritten by Lending Club. And this is a program that is eminently scalable. I can see no reason why most of the 7,000 banks in this country won’t have a program like this in place in the near future.
Here is a link to the official press release.
Today, Lending Club announced a new partnership, one that many of us have been anticipating for some time. It has been almost two years since Google invested in Lending Club and we have all been waiting for some kind of partnership to be announced since then.
While the partnership announced today is not what many of us anticipated it is significant because it marks a first for Lending Club and could open up an entirely new growth area for the company.
Google for Work Partners Program
The deal announced today between Lending Club and Google is for partners in the Google for Work program who are looking for a loan. But what is interesting is that these loans will not be put on Lending Club’s platform, they will all be funded directly by Google. Lending Club will create a special program with customized underwriting rules just for Google.
The pilot will allow loans up to $600,000 for approved Google reseller partners. These are companies that are reselling Google for Work services who are looking to expand. There will be no origination fees on these loans and they will be two-year loans with only interest due in the first year. This will allow Google partners to get favorable loan terms probably better than they could get elsewhere.
A New Way to Deliver Credit
I called Lending Club this morning and chatted with CEO Renaud Laplanche to get some background on this new partnership. Laplanche explained why he is so excited about this new program: [Read more…]
As the sun sets on another year I like to look back and think about the biggest news stories of this year. And what a year it was. There were so many firsts it was hard to cull the list of stories down to just five.
But here are my top five news stories of 2014 in chronological order.
When I received a call from Lending Club back in April announcing some big news I was expecting it would be IPO related but I was completely wrong. Lending Club made their first acquisition, a traditional lender called Springstone Financial, that specializes in loans for dental patients as well as private school education. This was a milestone for Lending Club and our industry in general as it was the first significant acquisition by any platform. To pay for this acquisition Lending Club raised $65 million in equity that valued the company at $3.76 billion.
The global leader in online small business lending raised this major funding round over the summer, more than doubling how much they had raised to date. This round put Funding Circle in a very strong position in the two markets it operates in: the USA and UK. It dominates online small business term lending in the UK where it does more loans than the rest of the industry put together.