It’s been a good week for marketplace lenders on The Street. After OnDeck announced that it had notched better-than-expected earnings and loan volume, LendingClub followed suit with with a report that saw the firm beating Wall Street’s estimates for earnings and new originations. That growth came despite widening net losses and an environment where interest rates are beginning to climb.
“We had a great quarter, record revenue on the back of record originations — and with the success of some of our early cost management initiatives, we’re starting to see flow through to the bottom line. So, I’m happy to say that our core business is firing on all cylinders,” CEO Scott Sanborn told investors on yesterday’s call.
By The Numbers
Excluding a few one-time items, LendingClub saw its earning increase by three cents per share — ahead of the 2 cents analysts were looking for before earnings were reported. Revenue came in at a record $177 million — an increase over last quarter’s $140 million in revenue — though it was a more expensive run of revenue, as a 44 percent jump in expenses managed to eat up all of that added revenue.
Increased revenue from transaction fees was up 27 percent to $136 million in the second quarter.
LendingClub’s origination efforts were also particularly powerful during Q2, with the marketplace lender standing behind a record $2.82 million in loans, up 31 percent from a year earlier. And those loans, the CEO noted, are increasingly coming from repeat customers.
“Since our inception, about a quarter of our more than two million members have gone back to us at least once for another loan,” Sanborn said on the call with analysts.
LendingClub also reported a 50 percent uptick in applications year-on-year.
LendingClub did notch losses in Q2. Net loss widened to $60.9 million from $25.5 million a year earlier, due largely to two extraordinary expenses including a $36.5 million goodwill impairment for the patient and education finance unit. Sanborn noted that while the company’s patient and education finance unit was performing well, it is “not growing at the rate we had anticipated when we acquired it.”
LendingClub had acquired the business in 2014 for $140 million.
As for the rest of the year, LendingClub’s forecast was largely unchanged, with its revenue forecast remaining between $680 million and $705 million.
LendingClub has been on the long road to recovery since May 2016, when an internal scandal led to the ouster of the firm’s founding CEO Renaud Laplanche and a mass exodus of lenders from the platform.
And the push for said turnaround is paying off, Sanborn said — and LendingClub is seeing its investors return, its originations go up and consumers begin to trust it as an alternative form of credit underwriting that is cheaper for consumers than the average credit card rate.
“What started as a niche product is becoming mainstream enabled by a technology and data-driven experience that delivers fast and simple access to credit at a lower fixed rate than credit cards,” he noted.
The firm was also bullish on its new areas of interest — particularly in its auto loan refinancing business, where Sanborn noted that on average they are saving their customers $80 a month in payments. And auto lending, he noted, is an excellent springboard to other services. The same skills needed to securitize an auto title for an auto loan refinance, he noted, are also applicable for loan underwriting — particularly for customers the firm is not able to approve or who can be approved at the very upper end of Lending Club’s price range, interest rate-wise.
And, he noted, the applications expand from there.
“The information I need in order to assess our ability to save you money on your auto is effectively the same thing I need to assess if I can save you money on your insurance. So it would be logical, while I have you at that time, to see if I can save you more than your $80 off the car payment, saving money off the insurance payment. That is an example of the kind of thing you can expect to see us exploring over the coming quarters.”
Shares of Lending Club — despite the strong results — were trading down after hours trading, by about 2.4 percent.