LendingClub: Consumer Stress Drives Loan Demand
loan clubThe transition to a digital banking model continues apace, but its core consumer lending business continues to gain traction in an inflationary environment, where maintaining traditional consumer debt is becoming difficult to manage.
“Credit card balances are now back above pre-pandemic levels and credit card rates are rising,” the CEO said. Scott Sanborn said during a conference call. “This leads to high demand from borrowers for personal losses. As a result, we increased loan volume by 19%. »
Elsewhere, revenue of $330.1 million was up 61% year-over-year, riding tailwinds from growth in net interest income and market revenue, which grew 36% . The origins of the consumer market, as detailed in the most recent additional materialsrose 29% to $2.8 billion.
Overall deposits of $4.5 billion were up 78% from June 30, 2021, the company said.
Total loans held for investment (excluding PPPs) increased by 106% compared to June 30, 2021, reflecting growth in personal loan originations and an increase in originations held in the held for investment portfolio. investment. The percentage of issues held for investment purposes rose to 27% from 20% a year earlier, according to Press release.
In supplements Released by the company alongside earnings, market revenue of $206.4 million was up 36% year-over-year, reflecting growth in market creations. FinTech-related core revenue accounted for 59% of revenue, with banking revenue accounting for the remaining 41%.
Additionally, the average FICO score for the management portfolio was 721 and the average FICO score for the portfolio held for investment was 730. For the personal loan portfolio, the average FICO score is over 700 and the average income exceeds $100,000.
Provision for credit losses increased to $70.6 million from $34.6 million last year. During the conference call, Sanborn noted that revenue growth outpaced origins growth by 41%.
“We have positioned the business well to capitalize when we see quality growth opportunities while remaining aware and cautious of risk,” Sanborn said.
Going forward, demand from borrowers will remain strong in the current quarter and then weaken in the fourth quarter, which is related to the usual seasonality. With a nod to institutional business, Sanborn noted that as rates rise for some investors, their funding costs will move along the forward curve.
“These investors are looking for more yield to cover their increased costs. We will eventually be able to pass on price increases to borrowers who will see their cost of credit change as the primary rate moves,” said Sanborn, who added that LendingClub’s proprietary loan auction platform will offer a conduit to read the clearing price and moderate loan. volume to meet investor demand.
See also: LendingClub’s LCX platform for obtaining client-to-client transactions
“As the economy improves, we will be ready to build on our FinTech advantages, opening up the market to drive scale and gain market share,” Sanborn predicted.
Chief Financial Officer Tom Casey said that in the quarter, LendingClub retained nearly 27% of consumer loans, which was above the company’s target range of 20-25% similar to the first quarter.
Management noted that delinquency rates across the service portfolio remain below pre-pandemic levels. Sanborn noted on the call that the consumer base “is very strong on leading and lagging indicators, including overall delinquency levels.”
And with a nod to digital banking efforts — where the average bank loan portfolio grew 64% to $3.7 billion — and a vertically integrated model that diversifies revenue streams and revenue streams interests, management noted that a key area lies in connecting consumers who borrow from LendingClub to their primary checking accounts.
“We have industrialized the acquisition of Radius and made their pipes capable of handling scale…this is an opportunity to engage more with our members,” he said.