LendingClub Loan Originations Surge 27% as Consumers Look to Consolidate Debt

LendingClub’s latest quarterly results show an acceleration of loan originations, and banks have moved back to the company’s platform as consumers look for ways to consolidate and pay down debt — particularly credit card debt.

The company’s earnings supplementals indicated that loan originations were up 6% sequentially to $1.9 billion, where that tally had been $1.5 billion in the third quarter last year, up nearly 27%.

CEO Scott Sanborn said on the conference call with analysts that “credit outperformance now supported by an improving rate environment.” Banks, he said, are returning to the platform, supporting marketplace revenue.

With a nod toward the company’s recent acquisition of the technology underpinning Tally’s credit card management solution, he said that the deal will “accelerate our product roadmap and drive future revenue growth.”

Investors sent the shares 7% higher in after-market trading on Wednesday.

The company’s balance sheet has grown by 25% since the beginning of the year, to $11 billion in total assets — and a quadrupling since the company acquired Radius bank at the beginning of 2021.

“Credit remains strong, and we continue to consistently perform 40 to 50% better than our competitive set across the core consumer segments we serve,” Sanborn said. The company materials detail, for example, that 30-day delinquencies in the FICO band from 660 to 719 were 2.4%, where the peers were recently at 4.4%.

Multipronged Strategy

He noted that the company’s three-pronged strategy is to acquire customers to help them lower the costs of their credit card debt, and “once acquired, [keep] engaged members through a mobile app and through products, tools, and features that provide added value and encourage repeat visits.”

As he added later in the call, “The value of refinancing credit card debt through a personal loan is the most compelling it has ever been.” The mobile user base has increased by 20% each month, Sanborn said.

“Those who are using the app are visiting us almost 20% more often than non app users,” Sanborn said. “And that increased engagement is translating to greater issuance with app users demonstrating a higher propensity to take another product from LendingClub.”

The company’s DebtIQ product — the debt monitoring and management solution — will be accelerated, in terms of rollout, with the Tally acquisition, Sanborn said, with enhancements rolled out beginning in the middle of next year.

“Over time, we’ll be enhancing our application funnel and our data foundation to enable smart, seamless cross-selling of products beyond unsecured lending,” said Sanborn.

Additionally, the company has seen $500 million in deposits tied to its high-yield savings accounts.

As Sanborn told analysts, “These repeat customers come at low to no acquisition cost. They deliver better credit performance. … It  creates a bit of a flywheel in our member base.”

CFO Drew LaBenne said on the call, “Credit continues to perform as expected, as evidenced by our net charge-offs on our held for investment portfolio declining 16% sequentially” to $56 million. The net charge-off ratio was 5.4% in the third quarter, down from 6.2% in the prior quarter.

“Delinquencies on the consumer portfolio also continued to improve,” said the CFO.

For the current quarter the company is guiding to loan originations of between $1.8 billion to $1.9 billion.