LendingClub Shares Plummet as Loan Originations Slow

LendingClub’s latest quarterly results, released Tuesday (Jan. 28), indicated growth across several key metrics, including loan originations and deposits through its digital banking arm, and some improving credit metrics.

However, in some cases, growth decelerated in the final quarter of the year, and forward-looking guidance helped send shares down 23% after hours on Tuesday.

The company’s earnings supplementals indicate that consumer loan originations in the fourth quarter were $1.8 billion, up 13% year on year. That rate is a deceleration from the 23% pace that had been seen in the most recent third-quarter earnings report. Revenues were 17% higher to $217.2 million. Deposits were up 24% year over year to $9.1 billion.

In terms of guidance, the firm’s first-quarter projections of loan originations in the range of $1.8 billion to $1.9 billion would represent growth of 12.5% to about 18% from a year-ago levels.

Net Charge-Offs Improve

Company materials also detailed that net charge-off ratio in the held-for-investment portfolio of loans stood at 4.5%, better than the 6.6% seen last year.

During the conference call with analysts, CEO Scott Sanborn said that “delinquencies [were] more than 40% better than our competitive set.” He said credit performance was tied to the firm’s “data advantage, flexible technology platform, and disciplined risk management.” Marketplace investor demand has been notable, as banks purchased roughly a third of the company’s loan volume in the fourth quarter, up from less than 5% at the beginning of the year, according to Sanborn.

He said that early results for the company’s “top up” offering, which enables users to consolidate their existing loan balances with new borrowings tied to one monthly payment, has seen an 80% “lift in issuance dollars per member compared to offering a repeat personal loan.” The company’s mobile app users engage more frequently and demonstrate a higher propensity to take another product versus web-only members, Sanborn said.

“Therefore, we plan to enhance the functionality of the app over the coming year with new high-engagement experiences and features. This includes DebtIQ, our debt monitoring and management tool, which will help members stay on top of their debt and further highlight the urgency and value of refinancing their credit card debt,” Sanborn said. The DebtIQ offering, he said, has driven a 50% increase in member engagement and a 25% boost in loan issuance for enrolled members.

CFO Drew LaBenne said on the call that marketing expenses will increase, adding that with the first quarter guidance, “We are gaining confidence that the sustained sales price improvements in the marketplace will allow us to open up additional paid marketing channels as we enter the seasonally favorable second and third quarters. We expect to be able to continue growing loan volumes as we move through the year,” and the fourth quarter of the year may see originations about 25% above current levels.

Pre-provision net revenue guidance for the current quarter of $60 million to $70 million was, as one analyst noted on the call, a bit below consensus of about $73 million. That number would be impacted by increased marketing spend, according to management commentary.

During the question-and-answer session with analysts, and in reference to the flat growth implied by the current quarter guidance, Sanborn noted that the fourth and first quarters “are typically our most challenging, seasonal quarters in terms of customer response.”

And in reference to deposits, management said later during the call that the LevelUp savings product had brought in $1.2 billion in deposits since the August 2024 launch.  “You get our best rate if you are adding to your savings account every month,” Sanborn said, adding “What we’re seeing is more than 70% of our customers are doing that. So I think it’s both a good product for the customer and has been successful for us.”