Marketplace Revenues Sink 28% as LendingClub Eyes Lower Loan Originations

LendingClub’s results showed that higher interest rates are cutting into investors’ demand to buy loans.

The company said in its earnings materials on Wednesday (Jan. 25) that marketplace revenue is down 28% as a result.

Quarterly loan originations were $2.5 billion in the latest quarter, down from $3.1 billion last year. The supplemental materials revealed that marketplace originations in the latest period were $1.8 billion, down from $2.3 billion a year ago.

The company also said that its provision for credit losses of $61.5 million primarily reflects $700.8 million of quarterly loan originations held for investment.

As for anticipation of loan originations on a go-forward basis, the company said that it expects to originate $1.9 billion to $2.2 billion of loans in the first quarter of 2023. That would be a decline from the $3.2 billion in overall originations that had been seen a year ago in the first quarter.

CEO Scott Sanborn said during the conference call with analysts that “our goal when the environment stabilizes, is to continue to grow the bank balance sheet and the corresponding interest income revenue stream with marketplace revenue.”

But in the meantime, he said, the company has to navigate the current macro environment, and high interest rates are putting pressure on marketplace volumes as “the relative value we can provide is compressed.”

As PYMNTS reported this month, the company is cutting 14% of its jobs — or 225 positions — as loan demand wanes.

Rate-Driven Pressures

Management said on the Wednesday call that rate-driven pressure is the biggest driver of the volume reduction  non-bank investors who’ve seen their cost of capital increase.

Sanborn said that the loans that are held on the company’s balance sheet are tied to prime and high prime FICO score customers. The company has noted that its originations focused on customers with average FICO scores of more than 700 and average annual incomes above $100K.

Sanborn noted that the company’s delinquencies have outperformed industry averages but added that “we need to remain vigilant and proactive.” The company reported that its delinquency rate on its personal prime loans was 2.2% in the latest quarter.

In the current environment, he said, there has been pressure on near-prime-FICO score members and those with lower incomes. As a result, near-prime loan underwriting volumes are down more than 50% from previous peaks.

“Longer term, the opportunity to grow personal loans remains significant with credit card balances building at an over 20% average APR,” he said.

CFO Drew LaBenne said that growth in deposits continued in the wake of its acquisition of Radius Bank. Deposits grew 104% year on year.

“Now that we have scaled the online banking platform that we acquired since the closing of the Radius acquisition in the first quarter of 2021, we have grown the bank from $2.7 billion in assets to $7.6 billion in assets, which is a compounded annual growth rate of over 70%,” he said on the call.