LendingClub Sees Traction Building ‘Lifetime Lending Relationships’

LendingClub’s latest results noted growth in loan originations, a surge in repeat business — and cross-pollination efforts that management said reflect the ability to deepen, and lengthen, customer relationships.

CEO Scott Sanborn noted on the conference call with analysts that originations were up 10% to more than $1.8 billion.

“We have calibrated the business to the current operating environment,” he said on the call, as “strong credit performance” was a hallmark of the quarter, and said that delinquency rates were 40% better than peer firms, due in part to the platform model that he said allows the firm to “rapidly respond to changing macro conditions.”

Credit losses across all loan vintages have been stable to improving, he said.

The structure certificate program, he said, continues to offer investors “an attractive” alternative to warehouse loans and securitizations.

He noted that consumers are gravitating to the company’s platform to help pay off their credit card balances, where interest rates stand at historic highs, and said that the company’s 5 million members are “highly sought after” customers with high FICO scoreds and high incomes.

“They are digitally savvy and eager to take steps to improve their financial outcomes,” Sanborn said.

One way the company plans to keep engagement at high levels is through the mobile app, said Sanborn, who added that LendingClub has been building “lifetime lending relationships” that are illustrated in the second quarter results, which underscore that strategy.

Digital servicing tools available on the site have lowered the operational costs of originating a personal loan by one-third over the past year, Sanborn said.

“Our mobile app provides a powerful platform for engaging members after acquisition,” said Sanborn, who added that following a limited release earlier in the year, the company began marketing the app to customers more broadly this quarter, as first-time downloads doubled during the quarter, and there was a 20% month-over-month increase in app users in June.

“They’re logging in about 25% more often than web-only users,” Sanborn said, offering up an engaged audience to which LendingClub can communicate new offers and services.

Repeat Business

About half of the company’s members return for a second loan, he said — and they return at near-zero acquisition costs. The credit performance is up to 20% better than new borrowers, Sanborn said.  These repeat customers have also been embracing offerings such as TopUp, which allows members to access cash while swapping out of their existing LendingClub personal loans at the same or better rate.  Those innovations, underpinned by the company’s digital bank, he said, help deepen relationships with consumers.

CFO Drew LaBenne said that the originations were above the high end of the company’s guidance. Company supplementals reveal that 30-day delinquencies were better than competitors across all FICO scores, where the data show, for example, that in the 660-719 FICO range, the competition figure was 45%, and LendingClub’s was 2.4%.

The company is guiding to current quarter loan originations of $1.8 billion to $1.9 billion.

LendingClub shares were up 1% after hours.