Lending Club Earnings Results Review – Q4 2014

Lending Club Q4 Results

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.

Since going public, Lending Club has been anything but quiet, announcing a Google partnership, a deal with Alibaba and finally a deal with 200 community banks.

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.
Lending Club Total Loan Issuance

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.

 

LC EBITDA Margins

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…]

My Quarterly P2P Lending Results – Q4 2014

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.

P2P-Lending-Results-Q4-2014

As you look at the above table you should take note of the following points: [Read more…]

How Ryan is Investing in Lending Club and Prosper in 2015

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…]

Lending Club Signs a Deal With a Consortium of 200 Community Banks

Small Community Bank

The big announcements keep coming from Lending Club. While the partnerships with Google and Alibaba were big news, the deal announced today may have a more dramatic impact on Lending Club’s future.

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.

Google and Lending Club Announce Their First Partnership

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…]

The Biggest Marketplace Lending News Stories of 2014

Sunset

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.

1. Lending Club Makes its First Acquisition (coverage in Lend Academy, Techcrunch)

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.

2. Funding Circle Raises $65 Million (coverage in Lend Academy, Businessweek)

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.

3. CircleBack Lending Gets $500 Million Commitment from Jefferies (coverage in Lend Academy, Financial Times)

[Read more…]

OnDeck Capital Has a Successful IPO Today

OnDeck Capital IPO at the NYSE

Following hot on the heels of the Lending Club IPO last week comes another online lender going public. Last night, OnDeck Capital priced its IPO at $20/share which was above the expectations of $16 – $18 per share. At $20/share OnDeck raised about $200 million and was valued at around $1.3 billion.

This morning its shares began trading on the New York Stock Exchange under the symbol ONDK and like Lending Club it received a solid first day bump. Shares opened at $26.50 and traded up throughout the day, closing at $27.98 – a 39.9% increase over the IPO price.

While OnDeck is an online lender like Lending Club, the two companies have very different business models. OnDeck’s focus is purely on small business lending and they are not a true marketplace. They primarily fund their loans off their own balance sheet. Having said that, they do have the OnDeck Marketplace where institutional investors can purchase whole loans and that program continues to grow. When I had OnDeck CEO, Noah Breslow, on the Lend Academy Podcast back in June he said that he was seeing increased demand from investors and that there was a waiting list for investors looking to deploy capital on the OnDeck Marketplace.

Speaking of growth, OnDeck has been on a tear lately. According to their S-1 in the first nine months of this year they originated $788 million in loans, a 171% increase over the same period last year. Their total loan volume originated since inception stood at just over $1.7 billion as of September 30, 2014.

[Read more…]

The Lending Club IPO: A First Hand Account at the NYSE

IMG_1489

Lending Club banners outside the New York Stock Exchange on IPO day

When I first started writing about this industry in 2010 I did it because I loved the concept and believed in its potential. Back then I was pretty much alone in that thinking.

But earlier today many thousands of investors around this country decided that they also believed in this industry’s potential as they bought equity in Lending Club in the first IPO this industry has ever seen.  It was an historic and groundbreaking day.

When Lending Club sent me an email early last week inviting me to their IPO celebration today on the floor of the New York Stock Exchange I didn’t hesitate. I wanted to be there and was honored that they included me.

So, this morning I arrived at the NYSE at 8am. There were dozens of people milling about outside admiring the huge Lending Club banner including a who’s who of the P2P lending industry. All the invited guests, numbering probably 100 or so, then headed inside where we were all presented with a bright red Lending Club jacket. [Read more…]

Thoughts from Industry Leaders About the Lending Club IPO

NYSE

This is an exciting time for anyone who follows this industry. It is officially IPO week for Lending Club and it looks like Thursday is going to be the big day.

For retail investors participating in the IPO through the Directed Share Program you should have received an email from Fidelity today. This letter was basically a duplicate of one that was sent out last week, the big difference being that the price range has increased from $10 – $12 a share up to $12 – $14 a share. This morning Lending Club filed the fourth version of their S-1 that reflected this change.

It looks like participants in Fidelity’s Directed Share Program will have a six hour window from 6pm until Midnight Eastern Time on Wednesday evening to confirm their expression of interest. From what I have heard these small windows are pretty typical with IPOs – I have heard some Loyal3 IPOs use a window of just one hour.

I reached out to a number of industry leaders today to get their thoughts on this historic event. Given that Lending Club is the first company to go public in our industry we will never again have an IPO like this one. So I wanted to get a range of perspectives on the record.

Here is what Aaron Vermut, CEO of Prosper has to say: [Read more…]

Lending Club Offering 50 Million Shares at $10-$12 in IPO

Lending Club S-1 Registration Amendment 3

Lending Club has a new S-1 registration out this morning as they begin their investor roadshow this week. It gives us a window into their expected valuation and the amount of money they expect to raise. From their filing:

LendingClub Corporation is offering 50,000,000 shares of its common stock and the selling stockholders are offering 7,700,000 shares of common stock. We will not receive any proceeds from the sale of shares by the selling stockholders. This is our initial public offering and no public market currently exists for our shares of common stock. We anticipate that the initial public offering price will be between $10.00 and $12.00 per share.

After the IPO there will be 361,111,491 shares of common stock outstanding at Lending Club so at $12/share this will result in a $4.33 billion valuation. This is less than all the pundits originally suggested and is only a small increase over the $3.76 billion valuation Lending Club received in April. Of course, they are no doubt hoping to get a pop on day one that will value the company much higher than that.

Lending Club Directed Share Program

There is a little information in the prospectus about their Directed Share Program (the shares that will be set aside for retail investors). Here is the entire paragraph relating to that program.

[Read more…]