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New LendingClub Account Performance – Q2 2019

Now over a year in, we share the returns of the new LendingClub account which was opened in 2018.

July 11, 2019 By Ryan Lichtenwald Leave a Comment

Views: 615

In April 2018, LendingClub provided us with $5,000 to open a brand new account. Since then we have been chronicling the status of the account on a quarterly basis. Below are links to the full series of blog posts in chronological order:

  • How to Open Up a New LendingClub Account in 2018
  • Setting Up LendingClub’s Automated Investing Tool
  • New LendingClub Account Performance – Q2 2018
  • New LendingClub Account Performance – Q3 2018
  • New LendingClub Account Performance – Q4 2018
  • New LendingClub Account Performance – Q1 2019

Every quarter I first like to take a look at any recent news from LendingClub. Last quarter we reported a pretty significant change as LendingClub ceased offering of E Grade loans.

In June, LendingClub shared a blog post titled, “Marketplace Loans in a Downturn: 5 Questions and Answers“. In it they shared that they are leaning a bit bearish citing a variety of factors. Despite this LendingClub believes that the coast is clear for the rest of 2019 with consumers being in a good position. They also discuss the advantages of investing in loans in a recession, how LendingClub loans may perform in a recession, what LendingClub will do from a servicing standpoint and how LendingClub’s approach will change in a downturn. From LendingClub’s blog post:

We found the biggest impact would occur if a recession started within two quarters of a loan’s origination date. Next, we looked at returns. There, our data suggest that loan performance would still compare favorably to what happened in equity markets during the last recession. In a severe recession we believe we could expect vintage level returns to fall into negative single digits.

LendingClub also shared updates regarding their credit policies. In it they discuss their early delinquency tool which uses customer risk signals and credit bureau data to flag higher risk borrowers. Nixing the riskier loan grades is one way that they have worked towards making returns more stable and focusing more on loan grades with higher demand. Grades A and B now make up 50% of LendingClub’s offering. Interest rates were also adjusted upwards in C grade loans in June 2019. You can view the full update on LendingClub’s blog.

LendingClub Account Performance

This LendingClub account was set to invest in all grades, which now includes loan grades A through D. Given the recent removal of E grade loans this has somewhat adjusted the current allocation versus target allocation chart as shown below. This is LendingClub’s suggested mix using their Automated Investing service. As of July 10, 2019 the stated average historical return is 5.70%. Over the next several months we will see more funds allocated to A grade loans as payments come into the account.

As we explain every quarter it’s important to understand the average age of the portfolio which now stands at 12 months. Accounts are considered seasoned around the 18 month mark. It is interesting to note that despite this account being on autopilot I am trending to the top end of returns for similar accounts.

Since we’re approaching the point at which an account is considered seasoned we can start to get an idea of the returns using the formula XIRR. Below is a snippet from a simple Google sheet I created. I am using June 30, 2018 as a starting point as all funds were allocated at that point. It is also beneficial to look at a rolling 12 month period. The account balances below were pulled from their respective statements. It is currently reporting a return of 8.45% which I expect will decrease over the next six months and eventually stabilize.

LendingClub New
6/30/2018 $5,145.62
6/30/2019 -$5,580.30
Formula: “=XIRR(E24:E25,D24:D25)” 8.45%

It has been quite the journey since I first began investing in Lending Club loans over 5 years ago. With this account it’s interesting to see what returns are possible today given that they have fallen significantly since I first invested. LendingClub has settled on the borrower segment they want to serve by removing E, F and G loans. While we no longer enjoy the double digit returns that were previously possible, investors are going to be better off if we were to enter a recession. As we continue to be in a low interest rate environment these returns could also be attractive for investors seeking income. For further reading Peter Renton, founder of Lend Academy and co-founder of LendIt, first got involved investing in 2009 and recently wrote a piece reflecting on his experience.

Filed Under: Peer to Peer Lending Tagged With: account, lendingclub, Performance

Views: 615

New LendingClub Account Performance – Q1 2019

We share the fourth update on a LendingClub account which was opened in 2018.

May 14, 2019 By Ryan Lichtenwald 4 Comments

Views: 1,802

In April 2018, LendingClub provided us with $5,000 to open a brand new account. Since then we have been chronicling the status of the account on a quarterly basis. Below are links to the full series of blog posts in chronological order:

  • How to Open Up a New LendingClub Account in 2018
  • Setting Up LendingClub’s Automated Investing Tool
  • New LendingClub Account Performance – Q2 2018
  • New LendingClub Account Performance – Q3 2018
  • New LendingClub Account Performance – Q4 2018

No More E-Grade Loans at LendingClub

Before we get into the performance of the account I’d like to discuss a few changes that LendingClub has made since our last update. Probably the most significant news was that as of May 7, 2019 LendingClub stopped offering new grade E notes except those corresponding to certain previously qualified or approved loans. Beginning July 1, 2019 no grade E Notes will be available to investors. Long time readers will remember the days when E grade loans produced high returns, often over 10% annualized for investors. This changed in recent years as defaults increased, particularly around the higher grade loans. Most investors saw their returns begin to fall in mid-2016 or even before that.

Last year, LendingClub decided to stop offering F & G grade loans to investors so it is no surprise that they continue to focus on more prime consumers, especially when you consider that banks make up a majority of their investor base. LendingClub also included this statement in a recent blog post:

We view this change as a natural evolution of our dynamic platform that seeks to match consumer demand with investor risk appetite. Grade E loans have historically accounted for a small percentage of volume on the platform.

What’s also interesting is that last week during LendingClub’s Q1 2019 earnings call which we covered here, CEO Scott Sanborn discussed the possibility of partnering with institutional investors on expanding the credit box to riskier borrowers. The way this might work is that LendingClub would host an alternative credit model instead of their own, for instance a model targeting thin file borrowers. Then investors could invest in loans originated by this third party with LendingClub only facilitating these transactions. But that is probably some time away from happening.

In LendingClub’s Q1 2019 platform update published to their blog, they discussed that lenders as a group continue to tighten credit. They also shared news about new tools they are testing such as the ability to detect borrowers who are more likely to default earlier in the loan cycle. LendingClub made no interest rate changes in the quarter, but are continuing to selectively tighten certain higher risk segments, while simultaneously growing lower risk segments.

Update on New LendingClub Account

Digging into the account’s performance it is worth reiterating that investors don’t have a clear picture of returns until the account is seasoned, which is about 18 months weighted average age. This is demonstrated in the image below as stated returns continue to decrease with age and stabilize around the 18 month mark.

The capital in my account had not been fully deployed at the end of the first quarter of 2018. In our next quarterly report we will share returns using XIRR which will start to give us an idea of where returns will fall.

As of May 14, 2019

When I first created this account I used LendingClub’s Automated Investing which suggested the allocation below. You’ll note the small allocation to E grade loans which will eventually fall to 0% as loans start getting paid off.

As of May 14, 2019

Conclusion

It will be interesting to see where the returns on this account end up falling. With little changes to interest rates recently, LendingClub is still an attractive investment in my opinion with returns around 6-7%. For comparison, interest rates on 5 year CDs are now around 3%. One thing that surely attracted investors who found LendingClub before 2015 was the potential to earn 10%. With the removal of E, F and G grade loans this is something that would be nearly impossible to achieve today. Clearly LendingClub has made it clear the types of borrowers they want to focus on.

Filed Under: Peer to Peer Lending Tagged With: account, lendingclub, Performance, Returns

Views: 1,802

New LendingClub Account Performance – Q4 2018

We share the third update on a LendingClub account which was opened in 2018.

January 23, 2019 By Ryan Lichtenwald 3 Comments

Views: 661

In April 2018, LendingClub provided us with $5,000 to open a brand new account. Since then we have been chronicling the status of the account on a quarterly basis. Below are links to the full series of blog posts in chronological order:

  • How to Open Up a New LendingClub Account in 2018
  • Setting Up LendingClub’s Automated Investing Tool
  • New LendingClub Account Performance – Q2 2018
  • New LendingClub Account Performance – Q3 2018

One of the things required for investing in marketplace lending is patience. Even though our new LendingClub account has been open around 9 months we still won’t have a full grasp on returns until around the 18 month mark. For now we can continue to look at the trends we’re seeing in the account.

What’s interesting is that my adjusted net annualized return is now 9.56% as of January 23 2019, significantly higher than last time I checked in at 7.81%. This is largely due to an improvement of the amount of loans that were in the buckets between late through charged off. It is a good example of how any numbers displayed early on in an account’s history should be taken with a grain of salt.

My portfolio now has a weighted average age 8.5 months and judging by the chart below I am currently trending above accounts that have a similar average interest rate.

Remember that for this account we have left the loan selection completely up to LendingClub’s Automated Investing service. As of today my account shows that I am currently overweight in my allocation to C grade notes and underweight in A grades.

Finally, it’s worth taking stock of the total interest earned for the year. Below is the screenshot from my December 2018 statement outlining my total interest earned for the year of $425.39.

Every quarter I like to look at any changes or communications related to LendingClub’s platform.  LendingClub shared their Q3 2018 platform update which provides their thoughts on the economic backdrop, credit environment and interest rates.  The company made changes to grades A and B loans which was the fourth increase in rates for 2018 at the time of the update. Interest rates rose between 49-114 basis points depending on the grade and sub grade. In addition to the platform update, the company released a Marketplace Insights report which specifically addressed marketplace lending in a rising rate environment. This report went in depth on this rate cycle, how marketplace lending has performed compared to other assets, changes to their platform over their history and the impact of other macroeconomic measures. You view their report for free here.

Filed Under: Peer to Peer Lending Tagged With: 2019, account, lendingclub, Performance

Views: 661

New LendingClub Account Performance – Q3 2018

We share the second update on a LendingClub account which was opened in 2018.

November 1, 2018 By Ryan Lichtenwald Leave a Comment

Views: 925

In April 2018, LendingClub provided us with $5,000 to open a brand new account. Since then we have been chronicling the status of the account on a quarterly basis. Below are links to the full series of blog posts in chronological order:

  • How to Open Up a New LendingClub Account in 2018
  • Setting Up LendingClub’s Automated Investing Tool
  • New LendingClub Account Performance – Q2 2018

Last quarter we discussed that any reported returns from screenshots of the account should be taken with a grain of salt. Once this account becomes seasoned around the 18 month mark we will begin to provide returns using the XIRR calculation.

Note that the account currently has a weighted average age of 6.5 months. The below chart depicts a gradual decrease of adjusted annualized return until returns finally settle. With this account I took a balanced allocation to loan grades which has resulted in a weighted average interest rate of 12.76%. All notes are purchased through LendingClub’s automated investment feature. Returns are likely to fall in the middle of the road as you can see other investors have experienced as evidenced by the red dots below.

[Read more…]

Filed Under: Peer to Peer Lending Tagged With: account, lendingclub, Performance, Returns

Views: 925

New LendingClub Account Performance – Q2 2018

We share the first update on a LendingClub account which was opened in 2018.

July 12, 2018 By Ryan Lichtenwald 10 Comments

Views: 1,261

Back in April 2018 we shared that LendingClub had provided us with $5,000 to start a brand new LendingClub account. We wanted to both report on the new investor experience and also share the performance of the account over time. In the last blog post I included a video which went through LendingClub’s automated investing tool. Before we get into the details of the account I also want to mention any changes that happened within the quarter that LendingClub investors should be aware of. On May 8th, 2018 LendingClub announced interest rate changes:

Effective May 8, 2018, interest rates on the LendingClub Corporation (“LendingClub”) platform have been updated. The changes are an increase of 0.12% for loan grades A2-A5, 0.15% for loan grades B1-B5, and 0.45% for loan grades C1-C5.

As a reminder, this account was setup to invest in LendingClub’s suggested ‘All Grades’ automated investing strategy. Below is a screenshot of my target allocation shortly after account setup with about half of my capital allocated to LendingClub notes.

Below is a screenshot as of today with all $5,000 invested which now closely resembles my target allocation.

You’ll notice that investing across LendingClub’s All Grades is skewed towards being conservative as opposed to allocating the same percentage across loan grades. Nearly 80% of my loans in this account are A, B or C grade loans.

At time of account opening, LendingClub noted historical returns range from 2.94% – 6.98%. This has decreased slightly based on the most up to date historical returns. Below is a snapshot of my LendingClub Summary. It’s important to note that Adjusted Net Annualized Return is not a good metric until the loans have seasoned. As we move further along in this experiment we will start to get a better idea of where returns are trending and will begin to include return calculations using XIRR.

Conclusion

The current status of my LendingClub account is very typical for new investors. A handful of loans have been paid in full while just a couple have entered either grace period or the late 31-120 days stage. A majority of the loans are issued and current. As loans begin to season we will see more enter grace period at which point some borrowers will catch up on their payments and some will ultimately become late and eventually charge off. We’ll publish our next update in early October to provide a full update on the third quarter.

Filed Under: Peer to Peer Lending Tagged With: account, lendingclub, Performance

Views: 1,261

How to Open Up a New LendingClub Account in 2018

In this post we share the process of opening up a new LendingClub account, the first in a new series we will be sharing over the coming quarters.

April 5, 2018 By Ryan Lichtenwald 10 Comments

Views: 350

Peter Renton, the Founder of Lend Academy opened his first LendingClub account in mid-2009. I opened my first LendingClub account in early 2013. While we are intimately familiar with the platform and the changes over the years things are on autopilot from the investment perspective. It has been a long time since we have gone through the process of opening a new LendingClub account.

Recently LendingClub reached out to us offering to fund a new LendingClub account so we could go through the new investor experience step by step. We wanted to take this opportunity to take a fresh look at opening and investing through LendingClub as a complete beginner. As outlined after the video below we’ll be sharing video content and blog posts along the way as this account matures.

Opening up a new LendingClub Account

The new LendingClub account setup is a simple, straight forward process, taking less than five minutes. As you’ll see in the video below LendingClub asks for some basic information during the signup process and then asks for information for the initial funding of the account.

Although I had to link my bank account manually in the video below, LendingClub now has the ability to connect your bank account quickly, simply by using your bank’s login credentials. Up to 15,000+ banks are available for linking, including USAA, Citi, Bank of America, and Chase.

New LendingClub Experiment

As mentioned earlier, LendingClub is funding our new account with an initial deposit of $5,000. This is part of a new program they are launching this year with a small subset of bloggers in the investing space. While they paid to fund this account we have complete freedom to write whenever and whatever we want. We considered this a good opportunity to start a new account from scratch and share the experience as both my and Peter’s accounts at LendingClub have been open for many years.

Once we invest this initial capital all principal and interest payments will be reinvested in new loans. Every quarter we will detail what is going on with this account, much like Peter shares his own returns.

In this series of posts we hope to answer several questions new investors may have such as:

  • What does signing up for a LendingClub account entail?
  • How do I setup automated investing?
  • How long does it take to deploy funds?
  • What returns could a potential investor expect starting in 2018?

Stay tuned in the coming weeks for our next video as we outline how to setup automated investing.

Filed Under: Peer to Peer Lending Tagged With: account, lendingclub, marketplace lending, opening, p2p lending, review

Views: 350

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ABOUT LENDIT FINTECH NEWS

LendIt Fintech News, Powered by Lend Academy, has been bringing you all the news and information about fintech and online lending since 2010 when it was founded by Peter Renton. We not only have the industry’s most active news site, but also the largest investor forum and the first and most popular podcast.

We are a team of fintech enthusiasts who have been covering the industry for many years. With a deep knowledge of online lending, digital banking, blockchain, artificial intelligence and more our team covers the daily news and writes in-depth editorials.

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