Happy Halloween everyone. October is in the books and there is nothing spooky about the results from Lending Club and Prosper. Together they issued $273.1 million in new loans up from just $97.4 million a year ago, a 174% increase. Despite the larger numbers the rate of growth is not slowing down – for most of this year the combined annual growth rate has stayed between 160% and 180%.
Lending Club Issues $223.1 Million in New Loans
October was another very solid month for Lending Club. Loan volume was up 9.7% over the previous month to $223.1 million with the number of loans issued growing to 16,247.
The big change for investors at Lending Club this month was more loan availability. In August and September the number of available loans routinely dropped to less than 50 before the new batches were added. Not so this month. Often we went over 500 loans available and we averaged probably 200-250 loans throughout the month.
I chatted today with Scott Sanborn, Chief Operating Officer at Lending Club, to find out what was behind this increased loan availability. He said that Lending Club has been working with their large investors to delay their deployment of capital and to stage new capital coming in over a longer time period. At the same time they have been working hard to increase the borrower volume. He emphasized again that Lending Club is committed to the retail investor and that was the driving force behind these changes.
Below are some stats from October for Lending Club as well as their 18-month chart. The black line in the chart below is the three month moving average.
Average loan size: $13,729
Percentage 36/60 month loans: 74.5%/25.5%
Average interest rate: 16.1%
Percentage of whole loans: 34.4%
Average FICO score: 699
Prosper Hits $50 Million up 51% Over Last Month
As I wrote about earlier this week Prosper has had a spectacular month. Not since the very early days of p2p lending in this country has any company grown so fast in just one month. In September Prosper issued 3,149 new loans totaling $33.1 million. This month Prosper issued 4,774 new loans totaling $50.1 million. That is a 51.6% increase in the total number of loans and a 51.3% increase in total dollar value of loans.
Back in February when I met with Prosper’s new management team for the first time, Ron Suber, their Head of Global Institutional Sales, made some bold predictions. Back then Prosper’s loan volume was languishing and they would issue just $9 million in new loans that month down 43% from their peak five months before. Prosper had been going backwards.
Despite that, Suber told me that Prosper would do $15 million in March, $30 million by July and $50 million by the end of the year. At the time I dismissed these predictions as ridiculously optimistic. Nearly 500% growth in less than one year was just not going to happen in my opinion.
Well I am happy to report that I was completely wrong here. While Prosper hit Suber’s projections right on target for March and July even he was too pessimistic on their timetable towards $50 million. Prosper achieved that goal two months ahead of schedule. Here is their press release that came out earlier today about hitting this milestone.
Below are the statistics for Prosper this month as well as their 18-month chart.
Average loan size: $10,517
Percentage 36/60 month loans: 67.1%/32.9%
Average interest rate: 18.7%
Percentage of whole loans: 62.9%
Average FICO score: 695
Two things come to mind with Prosper’s tremendous month. Firstly, I have to believe something else is happening here that we can’t see. You just don’t increase from 33m to 50m without this month being some sort of historical pivot of deeper significance. Secondly, I’m interested to see if Lending Club stops restricting itself and opens its platform wider in response to Prosper’s October numbers. Prosper could easily become known as the place institutions can go for premium loans when Lending Club refuses additional investment, a pattern Lending Club is probably keen to avoid.
Thankful for this new team at Prosper, specifically for their competition acting as a driver of excellence within this avenue.
It is good to see that lending club is addressing retail investors concerns about note availability.
Peter does a great job in painting a narrative of the month, Here’s an alternative narrative, just for the hell of it.
Though there is no doubt that Prosper had a great month, here’s an interesting tidbit. The gap in terms of actual volume, actual business, between the 2 companies actually widened. The gap in volume in September was around $170 million, in October $173 million. Put another way, volume at Prosper grew on a month to month basis by an impressive $17 million. At LC it grew by $20 million. Hey, just keeping things real here with, you know other facts. 🙂
Simon………..I comprehend every single word you wrote, but other than your first sentence, I have no idea what you’re talking about. In what planet does 1 months figures cause someone to the use words such as “pivot” & “deeper significance”?
The rest of your comment is equally mystifying. Is Prosper catching up to LC in some way that is not observable……………….or are you just reacting in knee jerk fashion to Peter’s narrative when you say ” I’m interested to see if Lending Club stops restricting itself and opens its platform wider in response to Prosper’s October numbers”? Why the urgent need for any response?
Hi Dan,
I’m tempted to not respond as you don’t seem to like much of what I usually have to say. However, I do think my statement could use a little unpacking, and I do enjoy talking about this stuff.
Octobers figures could easily hold deeper significance for Prosper. Record issued loans are normal for both companies, as is garnering the attention of national press or getting investment from some of the biggest names/firms in the country. But 51% growth is, as Peter said, “spectacular”. All stated, October could very well be a pivot for this company, full stop. A pivot in what direction, I do not know. Perhaps for the worse, as Prosper could have all this new volume because their new FICO underwriting is inadvertently faulty and is allowing in many people who should actually be kept out.
My hope is that this month is the beginnings of a deeply positive turn for Prosper towards becoming an equal contender to Lending Club within this asset class. My hope is that October will reveal itself to be an historic moment within the story of peer to peer lending – one where Prosper experiences large volume (and subsequently, profit) with refreshing regularity, success that would benefit everyone here. As much as many of us love Lending Club, I feel they could use a bit of the humility and stretch-towards-innovation that comes with being challenged.
Simon…………..Obviously competition is good, period. I’m not sure who you’re referring to when you say, “as much as many of us love Lending Club”, but I can only assume you do not include me, for I neither love nor hate either company. I simply attempt to look at their actions/results etc objectively & I felt that your comments painted a picture without consideration of “reality”. The reality is that Prosper has been & continues to be a distant #2 player in this market. The reality is that by this time next week LC will have already done more volume than Prosper will do this entire month. That’s reality!
Looks like it won’t take LC even a week to do more business than Prosper will do all month…………….it only took them 5 days. That again is reality!
Dan, I appreciate the alternative narrative and, of course, you make valid points. Lending Club is still growing much faster than Prosper in absolute terms and will continue to do so for the foreseeable future. Just one point I will make. If Prosper continues to grow at a faster percentage than Lending Club and can maintain that increased percentage then in 2-3 years time we will have a very different landscape here.
Simon, Thanks for the expansion on your original thoughts. I don’t think we can overstate how big the changes have been over the last two months at Prosper. In my opinion, it does mark an important pivot for the company and one that should see them ride the wave to profitability in a much faster timeline. Like you, I am very interested in seeing a more vigorous competitive environment.
As enthused as I am about the increases on both fronts, I have to agree with some of what Dan B said. While certainly there is evidence that some of the changes Prosper has made in borrower conversions has enabled them to expand rapidly, I think the key is to see how their growth plays out over the next couple of months. Of course if they continue to grow at even half of the 50% rate for the next couple months it will certainly provide for some additional conversation.
In this rapidly growing industry I don’t think Lending Club or Prosper will make quick changes based on the other’s monthly performance. In fact I think Lending Club would be in favor of Prosper growing, as it provides additional legitimacy and depth to the peer-to-peer lending industry. Additionally, each management team has their own expectations and designs on growth and development, and both are executing their respective strategies. I doubt either is concerned with “recapturing” market share from the competition as the market has yet to be fully defined.
I don’t expect Prosper to grow much at all over the next two months. We are getting towards the Holiday season and November has 19 working days as compared to October’s 23. Aaron Vermut said they are focused on growing their average daily origination number, so I think we will continue to see that number grow but I think this month will be relatively flat at Prosper as far as total dollars.
Percentage of whole loans did go up to 36% from about 25% if I recall, yet somehow still managed to make retail customers feel like there are more loans for them (which did feel that way to me).
Hassan, Good catch. I wondered if anyone was going to notice that jump. I am planning a separate post on the reasons behind this jump in whole loans in the next week or so.