LendingClub Promotes New Products to Offset Decline in Loan Originations

LendingClub saw loan originations continue to decline in the quarter ended Sept. 30 as bank investors remain cautious.

In response, the firm is promoting new products that meet the needs of both investors and LendingClub in the current environment, executives said Wednesday (Oct. 25) during the company’s quarterly earnings call.

Loan originations totaled $1.5 billion during the quarter. That was down from $2 billion in the prior quarter and down from $3.5 billion a year earlier, a decline the company attributed to reduced purchases by bank loan investors, according to a Wednesday press release.

The loan originations were in line with the company’s expectations, LendingClub CEO Scott Sanborn said during the call.

He said the current operating environment remains challenging, especially on the investor side of LendingClub’s marketplace. “Following the banking turmoil that emerged earlier this year, bank investors, which historically comprised 50% of our marketplace, have temporarily moved to the sidelines as they focus on fortifying capital and liquidity levels,” Sanborn said.

In response to this shift, LendingClub continues to lean into its bank capability and build new structures to serve both asset managers and LendingClub, Sanborn said. For example, in the second quarter, the company launched a structured certificates program that provides low-friction, low-cost financing for the buyer and attractive yield for LendingClub.

“Another advantage of our bank is our ability to hold and season loans for investors, earning interest income for LendingClub while increasing the certainty around future credit performance for the buyer, which is especially important in this environment,” Sanborn said.

LendingClub continues to leverage its banking capabilities to evolve its issuance mix and transition its balance sheet towards lower-risk, higher-yield securities, according to a presentation released in conjunction with the call.

Looking ahead, the company expects originations to rise in the fourth quarter, driven in part by strong demand for the structured certificates program, according to the presentation.

“Given the interest in the certificate program, we’re anticipating a modest increase in originations, with a range of $1.5 billion to $1.7 billion,” LendingClub Chief Financial Officer Drew LaBenne said during the call.

During the quarter, LendingClub also saw its net charge-off ratio rise to 5.1%, up from 4.4% in the previous quarter and 2.1% a year earlier, according to the press release.

On the new product front, by the end of the year, LendingClub will add loan servicing to its banking mobile app, Sanborn said during the call. This mobile-first, multiproduct platform will provide members with a seamless experience across lending, spending and savings.

The company will also launch a line of credit products that lets approved members sweep credit card balances into fully amortizing payment plans, and a debt monitoring and management experience that will help members track, prioritize and optimize debt payments, Sanborn said.

“Taken together, these innovations will further drive member engagement and satisfaction, which in turn should translate to better credit outcomes and higher lifetime value,” Sanborn said.

The post LendingClub Promotes New Products to Offset Decline in Loan Originations first appeared on PYMNTS.com.