That was quick. After receiving preliminary approval from the OCC on December 30, LendingClub announced today that they have now been fully approved to acquire Radius Bank. The deal is expected to close on or around February 1.
Here is a statement from CEO of LendingClub, Scott Sanborn, about the approval:
This is a transformative acquisition for the company and a watershed moment for the industry as we become the only full-spectrum fintech marketplace bank in the U.S. The customer benefits of this acquisition are even clearer now that COVID has accelerated Americans’ move to digital banking. As the only full-spectrum fintech marketplace bank, LendingClub will be able to use our technology and data-driven platform to provide new products and services to our millions of members that will help them both pay less when borrowing and earn more when saving. By combining with Radius, we will create a category-defining experience that will also dramatically enhance the resilience and earnings trajectory of our business.
So, LendingClub Bank will soon be born. It is an exciting moment for the company as they become the first fintech lender to buy a digital bank. While we have seen plenty of fintechs looking to become banks by applying for a license, LendingClub has blazed a new trail in their approach. And with less than 12 months from the announcement of the acquisition to approval it seems to be a speedier process. LendingClub has been working with banks for years and I know they put in serious compliance work after the 2016 fiasco so that probably held them in good stead with this application process.
Now, LendingClub paid $185 million for Radius Bank but they also get a fully operational digital bank that gels with their existing operation. And like most digital bank offerings in 2020 Radius Bank has seen strong growth. When they announced the acquisition last February they shared that Radius had $1.4 billion in assets and in today’s press release that number has grown to $2.4 billion.
One loser in this new arrangement is WebBank. They have originated nearly all of the $60 billion in LendingClub loans to date and soon after the deal closes they will be removed from the process as LendingClub Bank originates the loans. This will be less confusing for consumers and will save LendingClub serious money.
Along with the press release there is also a more detailed blog post about the acquisition that is worth a read. There is mention of the Founders Savings Account, this is the high yield savings account that will be offered to existing LendingClub investors. Unfortunately, there are no details on this account yet but we do know it is coming soon after the acquisition is completed. I am most interested to see what else LendingClub does for retail investors. A high yield savings account, while moderately appealing, is not innovative. I am hopeful we will see some groundbreaking products on this side of the business.
For their borrowers LendingClub will now be able to offer a full suite of financial products beyond the personal loan. They do have over three million borrowers and 79% said they would be likely to open a checking account if LendingClub offered rewards linked to helping them pay off their personal loans. That is another area where we could see real innovation.
LendingClub has made a big push towards financial health in recent years and it is mentioned several times in the blog post announcing the acquisition. So, we can expect this to be a good deal for consumers as the combined company rolls out new initiatives. I am very interested to see what new products LendingClub will deliver. I hope and expect this will include multiple new offerings for individual investors. Let’s stay tuned on that.