Lending Club’s 2nd Quarter Earnings


The Numbers

Yesterday Lending Club reported its earnings for the 2nd quarter ended in June. The company lost $81 million, or 9 cents/share in the quarter which is worse than the $4 million loss for the same period last year.

Most of the loss is attributed to additional expenses for a combination of additional professional fees (read: legal) on the LaPlanche loan mess and DOJ investigation as well as compensation and severance packages for laid off employees.

Loan originations were $1.96 billion, which is a little higher than Q2 2015 but a big 29% down from last quarter, as reported in the Financial Times.

As an aside, if you want to see what a non-US based perspective looks like on financial happenings, the Financial Times (the FT) based in London is a must read.

President and CEO Scott Sanborn is quoted in the report as saying that '15 of the top 20 investors on the platform are back investing funds albeit at lower levels than where they had invested before.'

We can look at this with the glass half full or half empty. 15 of 20 back is good considering that the fraudulent loan/CEO ouster is the kind of thing that brings down entire companies or at least creates fear and mistrust. The half empty is that 5 are not back and all 20 are in at lower investment levels than they were before.

Will they come back? We don't know and they probably don't either.

More Leadership Shakeup

CFO Carrie Dolan announced her resignation with the earnings announcement. This is along with the LaPlanche stuff that happened in May.

Bloomberg has some excellent coverage of the change in leadership. Bradley Coleman has been named interim CFO. He was the Controller. Fannie Mae CEO Timothy Mayapoulos, who has spent lots of time at various banks, is joining the board.

This appointment of Mayapoulos is seen as a sign of stability amidst the departure of these execs.

Last night the stock declined to $4.68 and at the time of this writing the stock opened lower to $4.56.

Since founder LaPlanche left LC, the stock has lost a third of its value. The company also cut 179 jobs in the quarter.


Lending Club as a company is still losing money although the loss this quarter was wider than previous ones.

If you hold LC stock, there are a couple ways to look at this. One way is that much of downside risk is priced into a less than $5 stock. This is what I think so far although I have no shares and no intention of buying. Another is that it could take a long time (maybe never) for LC to capture the juice it had when LaPlanche was running things and prior to all the May loan sale activities that led to his departure.

One of the few big reasons these lending platforms advocate for us little retail investors is the conventional wisdom that retail investors are 'stickier' to a platform, meaning they are likely to stay on longer and for more money. This is primarily due to having fewer investment choices. Institutional funds have lots of choices and lots of options for their funds and like all smart investors they go where they are treated best. Remember 15 of 20 of the biggest are back but at lower levels.

Will they continue to be treated well and with good returns on LC? If they are, then they will stay. If not, then they will be gone for good. One of the numbers I would watch is how much of the funding is coming from institutions. This will answer that question for us.

If you lend on the platform, I still believe in the integrity of the information we get and I am comfortable with reinvesting my money into new loans. I am NOT adding new money, nor am I withdrawing any. If I see more potential issues of trust or data integrity then I will reevaluate.

Is any of this affecting how you interact with Lending Club? Email me and tell me what you are doing or comment below.



About the author

Stu Stu Lustman, the author of this post, is a Credit Analyst by trade trying to bring Commercial Credit Analysis techniques to the world of Peer to Peer Lending. Check me out on Twitter, LinkedIn and Google+

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