Last June at the LendIt Conference Lending Club made a groundbreaking announcement that two commercial banks, Titan Bank and Congressional Bank, had joined the Lending Club platform. Both banks were investing in loans issued by Lending Club and, in the case of Titan, also offering personal loans to their banking customers through the Lending Club platform. There had been so much chatter that p2p lending was disrupting the traditional banking sector so it was positive news to see the two sides working together in partnership.
In early December, Lending Club CEO, Renaud Laplanche, gave an update on Lending Club’s banking partnerships when he testified before Congress that Lending Club now has seven banks participating as investors. Naturally, we were curious about what other banks had joined the platform.
Earlier today Banco Santander’s US division, Santander Consumer USA, launched an IPO in the US. Santander Consumer USA is best known as a provider of auto financing to Chrysler after they replaced Ally Financial (the old GMAC) as the retail and commercial financing arm for Chrysler. What is less well known is that Santander Consumer USA is one of the larger investors on Lending Club’s platform. Note, while Banco Santander is one of the largest banks in Europe, their US subsidiary is not technically a bank.
As you can see in Santander Consumer USA’s S-1 (IPO) filing, they made a major long term commitment to Lending Club when, in March 2013, Santander Consumer USA agreed to purchase up to 25% of Lending Club’s total origination for a period of three years. According to Santander’s website, they also have the right to purchase nonprime loans (probably policy code 2 deals). This is a huge deal that has been low profile to date.
Now that Santandar Consumer USA has gone public, we may receive more transparency on their Lending Club deal including possibly quarterly updates on their earnings calls. Yesterday, I reached out to Lending Club for comment on this investment commitment from Santander Consumer USA. Here is what they said to me:
- The 25% is simply a cap – we commonly do this with our large investors to ensure loan availability for all buyers.
- A material part of their purchasing (and their expertise) is in the pilot program reaching the expanded policy segment (policy code 2).
- We can’t disclose individual investors’ purchase commitments
- They are one of our whole loan buyers and compete against the others on an equal footing
- They began purchasing in Spring of 2013
You can read more details about the Santander Consumer USA IPO on Businessweek and Reuters.
Fascinating find, Peter. 25% is a huge cap. No wonder we continue to see more loans go the whole route. Wonder what we’ll hear this year at LendIt?!
Thanks Bryce. I agree that 25% is a huge cap and one that is probably overly generous on LC’s part. And yes, LendIt 2014 is going to deal with this and many other topics as well.
For those interested in investing into Santander for free (the equity), loyal3.com has a relationship with them allowing batch investment without commission. They also, prior to the IPO, made available to folks the opportunity open accounts in order to invest directly into the IPO.
Thanks for the tip on Loyal3, I wasn’t aware of them. Very interesting.
I vouch for LOYAL3 as well. I’ve used them to buy Berkshire Hathaway as well as the GoPro IPO today. I’d love to see Lending Club issue some IPO shares through them.
Peter,
Insightful piece. I too am surprised about the 25% cap being on the high end. That said, I’ve noticed an uptick in available loans the past few months. It got tight there for a while, but LC is doing a much better job of keeping the big players in check and giving the little guys (like me) a chance to buy good notes.
-RBD