It was another great month for p2p lending with total loan volume for August coming in at $84.4 million. But it was two different stories from Lending Club and Prosper this month.
Lending Club Jumps Another $10 Million to $70 Million
After first crossing $50 million in new loans issued in June and then $60 million in July Lending Club kept up their impressive growth and hit another round number: $70 million in August.
The pattern that is playing out at Lending Club these days was exemplified in August. The month started out strong with over $30 million in loans in just the first week alone. Then it settled down to a $1 million to $2 million daily average for the rest of the month. The huge surge at the beginning on the month halved the number of loans on the platform and then it slowly built up again towards the end of the month.
The number of loans issued at Lending Club broke 5,000 for the first time. There were 5,419 loans issued in August with an average loan size of $12,932. This average has been maintaining around $13,000 now for the last several months. But what is staggering is the loan numbers themselves: it was just back in February when Lending Club issued 2,540 loans – they are now well over double that number in just six months.
This recent rapid growth is reflected in their 18-month chart below. The black line is the three month moving average.
Prosper Has Their First Down Month Since September 2010
It was a different story at Prosper this month. After 22 months of new loan growth Prosper’s impressive record came to an end this month. Their total for August was $14.3 million down from $14.9 million in July. The number of loans was also down to 1,819 in August from 1,961 the previous month. The average loan size was a record, though, at $7,867 as the higher loan maximum for B and C grade borrowers took effect.
Unfortunately with Lendstats still down for Prosper investors I was not able to do any analysis to see the loan volume of large investors like Worth-blanket2 or Index_Plus this month. The Prosper numbers only look poor when compared to the stellar growth that is currently being shown by Lending Club. August was their second best month ever and was still up over 100% from August of last year. I expect they will be back to loan growth again next month.
But there is now a little hiccup on their 18-month growth chart.
Personally, I would have put more money into Prosper in August if I could have found enough notes to invest in based on my investment style. The best notes get swallowed up in minutes after they’re posted. Unless you’re right there at posting time to catch one or two better quality notes, you’re almost out of luck in finding anything decent to invest in. The automated quick invest tool is too slow to catch these notes. In particular the “E” grade notes go very very fast. I think I caught 2 “E” grade notes total all last month. Either Prosper needs to attract more borrowers to offer more to investors or they need to level the playing field for small investors. One of the “E” notes I caught was invested in by heavenly-interest9 three different times within a minute and I caught $25 of it and another investor caught $50 of it, heavenly-interest9’s 3 quick investments caught $3,925 of the total on a $4,000 note. That represents 98% of the note to one large investor, gone almost the minute the note was posted. I got lucky on that one but I’m sure I lost out on countless others. I like the 24 hour 5% limit to any one investor policy someone else suggested in another post. Level the field Prosper or I’m done with you.
@Dennis,
I share your concern about institutionals. It sounds like heavenly-interest9 is violating the spirit if not the letter of Propser’s 90% rule.
However, checking my accounts I was able to invest in 8 E loans in August. On one of them I’m investor #49 so it had to be out there for a while. Of course you and I may well have quite different selection criteria.
Yes there are a number (usually a very small number) of “E” grade notes that manage to get listed for a while, but those tend to have issues such as delinqeuncies or other things that make them less attrative. I, as I’m sure you do, have investment criteria and one of the the things I will not invest in are borrowers with delinqeuncies, past or present. You have to be very fast to catch the better “E” grade notes (no delinquencies) before the large investors quickly swallow them up. I’m having several issues with Prosper that is turning me off from investing there, this being one. I’m having better luck at LC and am looking to direct more of my investment dollars there. I still like Prosper, they just need to address some of these issues before I can get aggressive there again.
Looking at heavenly-interest9’s profile on Prosper, the label only shows Lender. I believe the 90% rule was instated for Institutional investors only. As such, I do not believe heavenly-interest9 is restricted to Prosper’s (unenforced?) 90% rule.
Neal/Dennis, This is a problem that really needs to get solved at Prosper soon. LC have a 75% limit on all large investors and there are virtually no loans that disappear from the platform before 24 hours. Whereas at Prosper many, many loans disappear within minutes. My filters are providing less loans than they did 3 months ago and so I have had to adjust my strategy in order to keep putting new money to work.
Major portions of loans disappearing like this within minutes have at least three distorting effects: 1. If the stated return on a loan class is, say 10%, but this is a mix of a 13% return on loans sold within minutes, and 7% on loans sold thereafter, then the stated return is misleading to all but the quickest and nimblest. 2. More critically, a p2p platform utilized primarily by very large or institutional investors is no longer peer-to-peer, but merely online lending. 3. Rapid funding results in lenders forfeiting a key advantage of p2p lending: the ability to ask questions and make prudent judgments based on borrower answers – fundamentals, logic, english usage. For example, I would lend to a bricklayer with poor english skills, but not to a programmer with poor logic and english skills.
Harry……….Your first assumption is a helluva big assumption considering that “very large or institutional investors” as you put it, have a rather uninspiring or mediocre history in terms of returns & therefore by extension, a mediocre history in picking the “best” notes. Your second statement is of course 100% correct………………but then no one’s been pushing the peer to peer aspect for some time now. In fact most references to the term can hardly be found on the websites anymore, if I’m not mistaken.
I meant Henry. Sorry about that.
Peter did Prosper give you a heads up about having a no growth month when you visited them?
Charlie, This topic never came up in conversation.
It doesn’t surprise me that Prosper looks like they may be plateauing while LC is continuing to grow. Prosper has become heavily reliant on a few large investors who fund significant portions of loans while crowding out the smaller lenders. I am also finding that fewer loans are meeting my criteria…an issue that doesn’t appear to be isolated to myself. In my opinion, Prosper needs to work on lender relations AND attracting more borrowers to their platform. I haven’t added new money in a few months mainly for reasons not related to Prosper, but they aren’t helping themselves either. Since I am not looking to add new funds at the moment, I can wait out for changes to both platforms, but Prosper isn’t looking to be profitable as soon as LC, and their loan volume is only a fraction of LC’s. If I were to put new money to work now, I would most likely be creating an account at LC and investing there. Hopefully they will implement a lot of changes between now and when I decide to add to my position.
I can’t confirm that, but I suspect that the Prosper hiccup has in part to do with Lendstats’s time-out. I noticed almost right away after Ken quit updating Proper’s data that some of the highest performing lenders had become less active: I don’t see their names show up as often as they used to in the loans. Obviously, many of the smartest lenders use Lendstats for making investment decisions. For the last couple of months, I have only been relying on my memory of past Lendstats statistical trends when picking Prosper loans, but I don’t know how much longer I can keep doing this. That’s one reason why I opened an LC account just last month. Perhaps, that also explains the recent surge in loans in LC.
Did you hear that Ken? It’s all your fault! The balance of fortunes between LC & Prosper & the volume of monthly originations all hang in the balance……………all because you stopped updating your Prosper data. It’s not because of the slow pace of new borrowers, its because the “smartest” investors have stopped investing………………& the institutionals (including the one that has committed $150 million to Prosper) couldn’t quite take up the slack 🙂
I’m sorry Ken, you know I appreciate your site……………..I’m just responding to one of the funniest posts I’ve read in weeks. Hope you’re enjoying your free time away from all silliness, including this one.
Dan,
It may sound silly, but names such as 113121. icanhasloanz, golffish2, and of course Ken himself, lendstats_com hardly show up on Prosper any more. You can check for yourself. They are the top-ranking lenders by ROI. There are many others like myself who look over their shoulders. So if they are gone, it is not hard to understand that many will follow suit.
FYI, believe it or not, I have a 7-monitor computer set-up with each monitor displaying a loan grade ranging from A to HR from Lendstats when I pick the Prosper loans in real time.
Impressive! And how many millions were all of you guys combined putting into play each month? One million, two million, two-tenths of one million? Because the institutionals are doing many many millions each month & they would soak up any decrease from all of you combined quicker than it just took me to write this paragraph.
Understand that I’m not debating whether some individual investors have or haven’t cut back…………………..I’m saying that it isn’t making the difference.
Dan, your guess is just as good as mine. Do you see lenders such as worthyblanket soaking up all the Prosper loans? I don’t. To be sure, they pick up some of the loans very quickly, often minutes after they are posted, but there are still plenty of loans left for individual investors. At any rate, I don’t mean to be a sticker on this one. To settle this issue, your will need some cold hard data comparing the contribution of institutions to that of individual investors. You are far too quick to dismiss my point.
Investforfreedom………Actually I’m familiar with the “cold hard data” & it doesn’t support your point. The reality of the situation today as it has been for months now is quite clear. It’s hardly a state secret that the monthly origination numbers at Prosper are almost wholly determined by the volume of borrowers…………….because there is now & there has been more than ample amount of money on deposit &/or committed to fund 1.5 to twice the volume. In fact it could easily be argued that given that reality, Prosper has done a pretty decent job in resisting any impulse to loosen standards just to get more borrowers through the door.
Dan,
What do you mean by “loosen[ing] standards just to get more borrowers through the door”? Unlike LC, there isn’t even an income requirement of $70k. Anybody with $25 can invest in it. That’s about as loose a standard as you could ever get.
But for the sake of argument, even by an extremely conservative estimate, you seem to be underestimating the power of individual investors. As of today, Prosper claims to have 1.46 million members. Suppose only 1% of these members, and if you don’t like it, I will grant you only 0.5%. This means 7000 of these members. Suppose they invest or reinvest $200 monthly using Lendstats data. You are talking about a volume of 1.4 million. And if they stop investing because of the lack of tracking data, this could have an impact.
You claim you are familiar with “cold hard facts.” Well, show me the money! Rather than talking in vague general terms.
Are these serious questions? I can’t help you if you don’t understand the difference between “borrowers” & “lenders”. What has the $25 minimum for INVESTORS have anything to do with what I said about “BORROWERS?
So let me just say this as plainly as I can. There are not enough borrowers. There are plenty of investors & investor money. Therefore if there were more borrowers, then there would be more volume, because there is no shortage of investors or investor money. That is as clear as I can make things. You got to stop staring at those 7 computer screens you got set up. They’re starting to mess with your ability to comprehend, I fear. 🙂
Also, why are you using 1% out of 1.46 million (as if that’s a reasonable number) when anyone that has done even a minimum amount of investigation knows that Prosper only has somewhere around 50,000 total investors?? Read the GAO report if you doubt that number to be a cold hard fact. Could it be that once again you’re not understanding the difference between investors & borrowers? So how does that intricate 1% calculation look now?
And if you’re going to quote me, quote me accurately. I said that “it could easily be argued that given the reality (that there is plenty of investors & investor money), Prosper has done a pretty decent job in resisting any impulse to loosen standards just to get more borrowers through the door.”
Dan/InvestforFreedom, I think we can safely say that Lendstats closing down did not do anything positive for Prosper. I have heard from several large Prosper investors who relied on Lendstats who curtailed their investing and several others who were piggybacking on them. But even the largest of these dwarf in comparison to Worth-blanket2 and Index_Plus. Without access to the investor data, though, we can’t know exactly what the story is.
Peter…………..Your generic & simultaneous response to myself & Investforfeedom is very PC & very 50/50 in its attempt to find common ground. However I for one am not appreciating that because only one of us has any idea of what we’re talking about……………& only one of us can apparently manage basic math. Please don’t lump us together.
I think that we can safely say that the elimination of the ability to ask LC borrowers whatever questions one wanted did not do anything positive for Lending Club when it occurred in mid 2011 either. We both heard from dozens (not several) of investors stating unequivocally that they would never invest another dollar because of the changes. We both know a blogger who strongly voiced his opposition to the new policy & stopped investing there entirely. There were some very strong feelings in those days, if you recall, feelings that persist to this day.
So did all these investors & their investments added together do anything to derail Lending Club’s growth? I don’t recall where you stood on that question, but I came out & claimed loudly to all that would listen that not only would it not curtail growth, but it would also not affect returns one iota. How did that call work out? Obviously the growth continued & accelerated to where it’s now, some 300%+ higher than it was when all that went down in mid 2011. Why? Because there was plenty of investor money & new investors……………& once the number of borrowers accelerated up, then doubled so did volume.
This situation with Lendstats & Prosper is similar in that the effect will be minimal because there is plenty of existing investor money & it’ll all come down to getting more borrowers. The investors who were using Lendtstats may slow down or even step away, & the followers may step away, just like the investors from LC who relied on the personalized Q&A stepped away. At the end of the day volume will not be affected by their absence.
Some of these investors will not like hearing this but it is what it is. Successful investors come & go & adapt to changing conditions. In any case, sooner or later, if enough demand exists, someone will come around & offer the same service as Lendstats anyway. So………………..
Dan, I do remember very well the Q&A issue at Lending Club in April last year. There was tremendous consternation among many investors and you are dead right that it did not impact Lending Club much at all.
The only thing I disagree with is your statement that there is “plenty of investor money at Prosper”. I know they want more investor money and this is evidenced by the number of loans every day that don’t get completely funded, many more so than Lending Club. It is not just all about borrowers, they need more investor money as well.
Lending Club didn’t really take off until LC Advisors came in and now that is fueling their growth. I think the same will happen at Prosper once they get the bankruptcy remote vehicle in place where we will see a flood of investor money come in to Prosper.
But as I stated in the article I think the down month at Prosper is not a big deal at all and I will be very surprised it they don’t have a record month this month. I will also make another prediction: Prosper will be at $20 million by the end of the year and if they do that they will have gone from $10 million to $20 million quicker than LC. This is not based on any inside information – just a hunch.
I don’t want to belabor the point so let me say that you get investors coming on to this site weekly (if not more often) lamenting how they’d invest more in Prosper if they could find the loans they want. You yourself have stated exactly that. In fact didn’t you (an investor) set a goal of how much you were going to invest in Prosper this calendar year. Are you going to be able to deploy all of it? Why not? Not enough borrowers that meet your filters or not enough money available to invest?
Not all loans getting funded is a separate issue. As the number of borrowers surge across the board, all the money sitting around waiting to be deployed will be deployed.
$70 million dollars * 1.11% Origination Fee (assuming every loan issued is a 36 month A-1, which it ain’t) = at least $777,000
Plus 1% of the loan payments.
How the heck are they NOT profitable yet?
Well,let me see……… It’s a good thing that you’re right in that the average origination fees are substantially higher than your figure…………………because do you want to take a guess as to how much it costs per month to rent 18,500 square feet in downtown (sort of) financial district San Francisco?? Go ahead, take a guess?
And then there’s payroll for 85 employees.
That employee number is more like 110 now and they are about to take over part of the floor downstairs in their building. They are also aggressively marketing to borrowers which costs a lot of money. And my guess is that revenue last month was over $5 million.
Em, in answer to your question they are not profitable yet because they are choosing to grow rapidly and put systems in place that will allow them to scale to many times their current size. The VC investors seem to be very happy with their progress as their valuation keeps increasing.
LC’s marketing seems to be working out well for them with $10 million increases in loan originations the past two months. Perhaps Prosper could take a cue from LC in the growth department. I wonder how happy the VC investors are over there. If September turns into another stalled month for Prosper and another double digit growth month for LC, then there better be some sort of shakeup at Prosper. I’m not sure how much greater an advantage Prosper could allow LC to gain without facing a real possibility of ending up as the minor player in this duopoly for the next couple of years and maybe the rest of the decade. Are we taking bets on whether LC will cross $100 million for a month before Prosper crosses $20 million for a month? My prediction is that by then end of the year, LC will have a $100 million month in originations. I don’t think Prosper will break $20 million a month until the first or second quarter of next year.
110 huh? So I’m guesstimating that just payroll must be over $1 million a month.
200 sq ft per employee?
Wow! That’s bigger than my first apartment!
I guess yours was in Tokyo, huh? 🙂
NYC, actually.
Roy S……….. Peter has already stated above that Prosper would get to $20 million by the end of the year, so it seems you may have some action on that bet. I’ll pass on this bet. It appears that LC have made a decision to cap their monthly growth to $10 million per month, at least for now. I base this on their behavior towards fully funded notes during the last 10 or so days of August. Therefore your estimate of $100 million a month before years’ end appears pretty damn safe. As for Prosper, you’re probably correct in that LC will get their $100 million month first…………………but I’d be shocked if it takes Prosper as long as the 2nd quarter of 2013 to get to $20 million & mildly surprised if they don’t do it by years’ end.
Dan, I’m not sure I know what you mean by LC’s behavior towards the last 10 days of August. I looked at Peter’s post again, I didn’t see any mention of what you seem to be implying (I’m not sure if you’ve mentioned in the comments section, but I’m not going through them again). I’m also not sure why they would be intentionally limiting growth…
As for Prosper, I don’t really think that it’ll take them until the second quarter of 2013, but another flat or down month may mean they are having issues over there. I was still experiencing Notes taking an inordinate amount of time from funding to originating for Notes that were in Verification Stage 3 (I’m hoping they’ll add another verification stage indicating that a Note will originate upon being fully funded if this issue continues). If these issues continue, then the second quarter of 2013 wouldn’t be out of the realm of possibility. I would like to see how September goes for them, though.
I’m sorry, “limiting” was a poor choice of words on my part. What I mean is that LC does a very good job of hitting their numbers & has a long history of hitting their target numbers of volume every month. This goes back a couple of years & I have no proof, but very little doubt that they hold back or accelerate end of month “paperwork” in order to hit a number &/or help next months number.
For example, a number of people right here pointed out that fully funded notes were just sitting around for a week or longer during the last week to 10 days of August.
I experienced this too on close to 50 fully funded notes last month. If all of these notes had issued on a more normal schedule, then LC would have done around $73-74 million last month. But then if they had done that then September would be more of a struggle to maintain that rapid month to month increase percentage. Instead, I believe they held back a bit, did a nice round $70 million & moved some of the fully funded sitting around notes to September (a shorter month) This will enable them to maintain the rapid growth to hit $78-$80 million this month. There’s nothing wrong or sinister about any of this & no I can’t prove, nor do I care to prove any of this, because I don’t see this as being a big deal at all.
But for the sake of predictions, my prediction is that LC will hit 78-80 this month, 87-88 next month, 96-97 in November & $105+ in December.
That makes more sense. I’m not sure whether that is the best strategy, if that is what they are doing. Yes, it’s nice for them to always show strong, continued growth, but from my perspective I would think that it would be more beneficial to originate the loans once they are fully funded. The sooner a loan is originated, the sooner payments are made, and the sooner interest is reinvested. It might seem to be a small and insignificant amount, but if your numbers are close, that is $3 – $4 million that is delayed for a week or two for September only. The numbers (thanks to compound interest) start multiplying very rapidly if they are doing this on a continual, monthly basis. …and with their originations so far above their closest competition, I don’t see why they would feel the need to continue to limit end-of-month originations. I guess it means that if you’re looking to transfer any money into LC, the beginning of the month is probably the best time if you wish to deploy as much of it as possible as soon as possible.
…if I do remember correctly, there was a video game company that was a little more egregious in their accounting in how they were recognizing income. I believe the SEC looked into their revenue recognition practices, but I don’t remember the outcome. If you are right, it seems that LC may be flirting with GAAP rules, though they probably aren’t subject to SEC regulations since they aren’t publicly traded, and I don’t think those practices would even be considered illegal, just circumspect…I guess maybe it would be most similar to how people try to adjust their incomes at the end of the year to avoid paying Uncle Sam any more than they have to.
I didn’t say they were continuously limiting……………I sad they were adjusting it my slowing down or speeding up. Last month, I believe, was a “slowing down” towards the end of the month. Also, I’m not sure they’re losing interest, because originated & issued are 2 different dates, if I’m not mistaken.
I didn’t mean to imply that LC is losing interest. What I meant was that the investors who are waiting around a week or two for a fully funded loan to originate are having their payments delayed by that amount of time (on a total of $3 – $4 million in capital), which isn’t a lot until you add up all the months that LC are attempting to slow down originations at the end of the month. I’m not sure what an issued loan is. Generally the loan begins when the loan is originated and the funds are released, so if the issued date is a different date, it is meaningless in the context of how soon investors will start to receive payments (principal + interest), and how soon they are able to reinvest those funds. It is the delaying of originations from August until September that will affect the date investors start receiving payments, and that is what I believe you were saying. Of course, if they are speeding up or slowing down originations to hit monthly targets, then it might all even out in the end.
Roy S………..Yes, I do believe it does even out.