Prosper Reports Surging Losses As Loan Volume Falls

Prosper Marketplace lending

In a filing Monday, Prosper has reported net losses for 2016 that have more than quadrupled — yet another sign that marketplace lending has a lot of rebuilding to do in 2017.

All in all, Prosper logged an annual loss of $118.7 million, up from $26 million for 2015. That loss, according to the in-house explanation, comes as the result of lower loan volumes, higher costs, legal settlements and restructuring efforts. Prosper isn’t alone in the losing money department — OnDeck is reporting $85.5 million in annual losses for 2016, and LendingClub is looking at $146 million.

Loan volume was nearly cut in half this year over at Prosper, falling a full 41 percent to $2.2 billion. That slowdown did not come from lack of borrower interest, but from the money managers who used to buy the loans who have looked to “pausing or significantly reducing their purchases of the company’s credits,” according to the filing.

Prosper makes its money charging fees for the unsecured personal loans it arranges, and the slowdown contributed to revenue falling by one-third to $132.9 million.

Since the start of 2017, Prosper has moved to improve its financial situation by shoring up loan funding. A month or so ago, Prosper inked a deal to  sell up to $5 billion in loans over the next two years to a consortium of investment firms.

David Kimball, who became Prosper’s CEO late last year, has said his main goal is getting the company to profitability, a goal that others in the market place lending segment seem to be coming around to sharing. For example, last week one of Prosper’s rivals — Marlette Funding — announced it will be cutting its staff by 20 percent.

It will also be back burnering expansion plans in favor of a focus on becoming profitable.

Whether those firms will be able to get to (or back to) profitability remains to be seen — at this point, it seems a waiting game as to when and whether those lucrative institutional investors will come back to buy into the platforms.