This morning, Lending Club announced their Q3 2016 earnings. In the third quarter, the company originated $1.97 billion in loans, marginally up from $1.95 billion in the second quarter. The financial highlights from the company’s press release are shown below:
From strictly an origination perspective the company did not have much growth in the quarter, but financials did improve from the prior quarter. The company highlighted $14 million of investor incentives that occurred in Q2 and $11 million in Q3. Also effecting the company’s financials were the $15 million and $14 million in expenses related to the board review that took place in Q2 and Q3 respectively.
The biggest news coming out of earnings was that Lending Club announced a large funding deal with Credigy, a subsidiary of the National Bank of Canada. Credigy will invest up to $1.3 billion in Lending Club loans and has already committed $325 million. Credigy is a consumer finance investment company which makes them a perfect fit to invest on the platform. Lending Club has long had banks investing through their platform but this is one of the few deals made public and the investment amount is significant.
One of the other topics on the minds of investors is the funding mix on the platform. While CEO Scott Sanborn noted that they have re-engaged virtually all of their largest investors on the platform, he also said that there is a ramp up for banks to reach target investment levels. Lending Club’s target mix for bank funding on the platform is 25% and for the third quarter it came in at 13%. In the Q & A, Scott said that the return of banks spills over into the fourth quarter so I expect we will see a bounce back of bank involvement in the next quarter, especially with the newly announced Credigy deal.
Managed accounts, which includes a few of the new 40 act funds represented 55% of the platform mix, funding over $1 billion in loans. This is not surprising given they are able to move quickly at scale and were able to take advantage of the incentives offered by Lending Club. As expected Lending Club ended their investor incentives that were put in place post May 9th, using only half the amount planned. Retail investors and Other Institutional remained relatively stable over the quarter. [Read more…]