The fallout from the departure of former Lending Club CEO Renaud Laplanche is still on the minds of many. Although this undoubtedly will have consequences in the years to come for the company it seems as though we may be moving towards the recovery phase. This morning, Lending Club issued a press release providing several updates on the company, including the conclusion of the internal investigation. They also hosted their annual shareholders meeting after postponing it earlier this month.
In the press release the board of directors officially named Scott Sanborn as Lending Club’s CEO and President. He was previously the acting CEO following the departure of Renaud Laplanche. This isn’t too surprising given that Scott has been with the company in various leadership roles since 2010. He began as the Chief Marketing Officer and starting in 2013 took on the role of Chief Operating Officer.
With the internal investigation coming to a close, two previously unknown items were brought to light. First, six funds that were managed by Lending Club’s subsidiary LC Advisors (LCA) were not valuing assets consistent with generally accepted accounting principles. This affected the net asset values as well as the monthly return figures for the funds. Lending Club is reimbursing investors in these funds. Subsequently, Lending Club enlisted the help of an independent valuation firm to make changes which includes an independent governing board.
Second, Renaud Laplanche and three family members took out loans in December 2009 totaling $722,800 to inflate origination numbers. Back in 2009 Lending Club still reported loan origination numbers on a monthly basis. NSR Invest shared with us that originations in November 2009 were $6,848,875 and December 2009 came in at $7,126,475. This is a difference of $277,600 which means December would have been a down month but for these loans from Renaud and his family. Lending Club noted that they are confident that there are no other situations where loans were inappropriately originated after December 2009
Not surprisingly Lending Club shared that originations for Q2 are slated to be one third lower than the first quarter of 2016. It’s important to note that the Lending Club debacle began mid-quarter so this estimate doesn’t show the full impact to the platform. It’s possible that Q3 2016 originations could come in even lower than Q2 depending on investor confidence. In Q1 2016, Lending Club originated $2.75 billion of loans. Assuming the one third drop estimate is accurate, we will see originations fall to around $1.8 billion in Q2. For historical perspective, Lending Club originated around $1.6 billion in Q1 2015 and $1.9 billion in Q2 2015. Unfortunately the recent issues and lower volume has resulted in Lending Club eliminating 179 positions. [Read more…]