News

May 6th 2016, Daily News Digest

  • Morgan Stanley considers On Deck at the mercy of the marketplace.
  • Niche lender, Promise Financial, gets married with LibreMax for lending capital.
  • Cross River Bank explaining they take loans on books from 6 out of 20 platforms they support.
  • Lending Club results expected Monday. LC expected to have an edge over competitors.
  • In China fintech has truly revolutionized the financial world.
  • New niche? MIT FCU is offering $10,000 bicycle loans at 5.99% APR.

 

Morgan Stanley Downgrades On Deck, Which Is At ‘The Mercy Of The Marketplace’, (Benzinga), Rated: AAA

Morgan Stanley has downgraded On Deck Capital Inc to Equal-Weight from Overweight, citing erosion of near-term profitability from changes in funding mix.

“[W]e think fluctuations in institutional demand could limit origination growth potential beyond 2016 and push out any meaningful profitability until 2018,” analyst Vasundhara Govil wrote in a note.

Although the analyst acknowledged that risk premiums could stabilize, Govil thinks a reversal to 7–8 percent gain on sale premium for the company is “unlikely in the near-term as credit quality is more likely to worsen than improve from here.”

Govil also warned that the company’s origination growth will be lower due to its increased dependency on balance sheet funding and higher competitive pressures. On Deck lowered its 2016 origination growth expectations to 30–35 percent from prior guide of 45–50 percent and below Morgan Stanley’s prior three-year CAGR expectation of 41 percent.

Govil cut the 2016 gross revenue forecast by 13 percent to $282 million from $324 million and now expects adjusted EBITDA loss of $44 million versus a prior estimate of $13 million profit.

“Even though ONDK’s forward growth rate is expected to be much faster than the compset, we think a premium is no longer justified given the variability in its future earnings stream,” Govil added.

The analyst also cut the price target to $7 from $17 on On Deck shares, which fell 1.37 percent to $5.04.

Promise Financial Secures Credit Funding From LibreMax Capital, (Press Release), Rated: A

LibreMax Capital, LLC (“LibreMax”), a leading structured credit investment firm, intends to begin investing in loans facilitated by Promise Financial.

These offerings address a growing need in the U.S., where there are 2,000,000 weddings annually with an average cost of $30,000.

The company has partnered with over 100 wedding venues, planners, and photographers to date.

Marketplace slowdown as investor skittishness takes hold, (Euro Money), Rated: AAA

Comment: these are old news for our readers. Just making sure everybody is aware still.

Prosper Marketplace chief executive officer Aaron Vermut has announced a 28% cut in the marketplace lender’s workforce along with the shuttering of its Utah office, which focused on loans for elective medical procedures. The news came after first-quarter loan volume at Prosper declined 12% year-on-year from $1.1 billion to $973 million.

Vermut joins rival online platforms OnDeck and Avant in reporting a slowdown in loan growth this year: OnDeck reported a loss of $13.4 million on revenue of $62.6 million in the period and first-quarter loan growth at Avant is down 27% year-on-year.

Vermut says he is now focused on building more resiliency into the company rather than just growth.

Prosper, having been an early adopter in the securitization market through its tie up with Citi, has now severed ties with the US bank after yields for the lowest ranked tranches in its ABS deals ballooned from 7.3% in late 2015 to 12.5% in March this year.

With most platforms, Cross River takes a random selection of loans onto its own books. With one platform it puts the loans into an SPV and takes a vertical slice of each loan.

“We currently take loans from six of the 20 platforms that we work with and are keeping up to 10% of the volume to maturity, provided we preserve our capital adequacy ratios.”

LendingClub Corp: Internal Headwinds Approaching, Stock Slides, (Business Finance News), Rated: A

Comment: there are quite a few articles in this direction today. We picked only one in order not to bore our readers.

LendingClub Corp (NYSE:LC) stock has declined more than 12% in the past three days. The stock is down 2% in pre-market trading today. The current downtrend can be attributed to the new lower revised estimates and targets given by Pacific Crest Securities. However, the sell-side firm has maintained its “overweight” rating on the stock.

The shares are expected to record robust performance in the upcoming quarters, due to expectations of higher earnings. This is actually the main reason why Pacific Crest has maintained the same rating on the stock.

The company most probably has credit hedge funds in its 21% institutional funding exposure. This gives it an edge over its competitors, which face lower demand for institutional loans. The sell-side firm has cut its revenue estimate for 2016 to $713.0 million, from $733.0 million, mainly due to changes in credit policy and funding mix, which will cause lower loans origination growth.

The company is also expected to employ some serious expense control mechanisms. It will soon be increasing its sales and marketing spending to meet its targeted investor mix. This factor has caused the sell-side firm to cut the EBITDA estimate to $125.0 million, down from $132.5 million.

The diversified sources of funding for LendingClub include funds from individuals, banks, and non-credit hedge fund institutional investors. This will provide the company resistance in turbulent economic times.

Five major fintech trends where China is leading the world, (South China Morning Post), Rated: AAA

China, the unrivalled giant in e-commerce, added another crowning achievement when it emerged as a leader in the fintech world.

Alibaba, the owner of the South China Morning Post, had the largest IPO in history because the hugely popular retailer benefits almost any time someone in China spends money online. So now it’s trying to pump even more money into the Chinese online economy, through the introduction of more current financial systems.

Ant Financial began as an outgrowth of Alipay, the company’s version of PayPal. A full 65 per cent of the money exchanged on Alipay in 2015 was sent via mobile. Ordering delivery from O2O food providers also became a major trend this year.

Widespread adoption of WeChat Payments was not instantaneous but rather the product of a long and precise marketing campaign. The tools that the company provides makes it such that any store can become an internet business and gives WeChat control of payment technologies from the get-go.

Lufax, a Chinese peer-to-peer lender and broker, has secured its position as the world’s most valuable financial technology startup by completing a fundraising which values the company at US$18.5 billion.

Lufax’s initial public offering could come as early as this year, though the company is still considering whether to list domestically or overseas.

There are currently more than 2, 500 p2p lending platforms with over US$60 billion in loans outstanding, up four-fold since 2014.

In January 2015 Alibaba Group’s Ant Financial Services has announced a new credit-scoring system that uses information from various Alibaba services.  This new service called Sesame Credit will look at the over 300 million registered users on Alibaba platforms.

 

 

Marlette Funding Appoints Josh Tonderys as President, (Business Wire), Rated: A

We are laser focused on being the long-term winner in this space and building a sustainable business that will prevail regardless of the economic cycle,” states Jeffrey Meiler, CEO and founder of Marlette Funding. “Josh is a proven innovator who has played a pivotal role in the development of our industry. We believe his leadership and experience coupled with our flexible platform and operating model strengthens our leadership position.”

The announcement comes on the heels of several major company milestones including originating over $2B in loans, celebrating its two year anniversary, signing several strategic partnerships and receiving Board approval to launch two new products.

Marlette Funding partners with Cross River Bank, Member FDIC, to grant Best Egg loans to consumers. Best Egg loan applications are processed online and approvals can take just minutes. Approved loan proceeds are typically funded in one day. Beyond its Best Egg product, Marlette plans to work with Banks, Financial institutions and other strategic partners to make its platform available to deliver co-branded, white label and other innovative loan products.

 

LendInvest: Looking beyond ‘desirable’ developments, ( Bridging and Commercial), Rated: A

It’s now been four months since LendInvest formally launched its new development finance product.

It’s a crucial, yet criminally underserved, area of the property market. In the various deals we have handled in that time, ranging from hundreds of thousands of pounds to those worth £10m, the frustrations facing the small-scale developer have been obvious: lack of money, money, money.

To hit the government’s target of one million new homes in England by 2020, we need to be building 200,000 new homes a year. In 2015, just 143,000 homes were completed. We need those new houses in Sheffield and Southampton, not just Surrey Quays and Stockwell.

 

YieldStreet Rewrites the Playbook for Alternative Investments by Providing Access to High Yield Opportunities, (Yahoo Finance), Rated: A

YieldStreet officially launched a tech enabled specialty finance and alternative lending platform connecting accredited investors to asset based investments. YieldStreet offers opportunities that are backed by collateral, have low market correlation, and generate strong yield, such as loans secured by real estate portfolios, litigation finance investments or even a loan to an NBA player secured by his contract.

Investments have low minimums starting at $5K with average target yields in the mid-teens. In the past, such options were exclusively available to ultra high net worth individuals, hedge funds or institutional investors.

Offerings have one to three year durations and target yields of 8-20%, providing valuable diversification and strength to any investment portfolio.

  • Completed 20 investments and funded $35M in loans
  • Returned $7M principal and interest to investors, with $0 principal loss*
  • Named one of Business Insider’s 2015 “Top 20 Companies Changing Wall Street”
  • Granted Registered Investment Advisor (RIA) status by the U.S. Securities and Exchange Commission in April 2016

Dear Jack Lew: Please Do Not Dampen Marketplace Lending Innovation, (Crowdfund Insider), Rated: A

This past Tuesday (May 3rd), twenty members of Congress joined to ask the Secretary of the Treasury, Jack Lew, to tread lightly when it came to the emerging marketplace lending industry.

A representative from the Consumer Financial Protection Bureau (CFPB) recently expressed his agency’s skepticism regarding online lenders stating;

“…it is simply too soon to know whether marketplace lending will be able to realize its potential as a means of delivering credit at a lower cost to consumers (and small businesses) who have the ability to repay the loans they obtain or whether the marketplace lending business model will prove unable to sustain itself through a full business cycle.”

So will Treasury adhere to the demands of the people and take a more thoughtful approach that encourages change for the better? We shall know more at some point next week.

Online lender RateSetter poached an exec from Lloyds to be its top risk guy, (Business Insider), Rated: B

Comment: we saw these news yesterday.

RateSetter, which lets people earn around 5.9% lending their money online, on Thursday announced Cyrille Sallé de Chou as its new chief risk officer. He joins from Lloyds, where is currently the credit risk director for mortgages.Jim Gunner has also joined RateSetter in recent weeks as chair of the fintech startup’s risk committee. He joined from HSBC, where he was

Jim Gunner has also joined RateSetter in recent weeks as chair of the fintech startup’s risk committee. He joined from HSBC, where he was senior executive for group risk.

Because RateSetter is a marketplace, the savers who lend their money out on the platform are taking on the default risk of loans. But RateSetter has set up a provision fund that can cover losses. Despite default rates hitting a peak of 2.53% in 2014, no customer has so far lost money, although that’s no guarantee they won’t in the future.

RateSetter has lent a cumulative £1.1 billion ($1.6 billion) over its platform since launch in 2011. The startup has raised a total of $46 million (£31.8 million) from investors including Artemis and Woodford Investments, the asset manager set up by star fund manager Neil Woodford.

Federal credit union (MIT FCU) offers Bike Loan and Hybrid Loan(marketing email), Rated: A

Comment: I happen to be an MIT alumni and I banked at MIT FCU. Hence I get their emails. 

Eco-friendly meets wallet-friendly
Ride with MIT Federal Credit Union towards a healthier, greener lifestyle, with less financial stress. Whether you’re pedal powered or battery powered, you can be making strides toward a better world for everyone, yourself included, tomorrow.

Bike Loan
5.99% APR *
Low fixed rates
Borrow up to $10,000
up to 24 months

Hybrid Car Loan
1.74% APR**
Reduce your carbon footprint
Save money on gasoline
New or used car purchases

 

KBRA Release ABS Pre-Sale Report: Driven Brands Funding, LLC, Series 2016-1, (Email), Rated: A

Driven Brands, Inc. (“Driven Brands” or the “Company”) completed its first “whole business securitization” in July 2015 (“Driven 2015-1”). As part of Driven 2015-1, Driven Brands contributed nearly all of its revenue-generating assets to several bankruptcy-remote special purpose vehicles as collateral for the Series 2015-1 notes.

The Company franchises, owns, operates and manages locations under the core brands of Maaco, CARSTAR, Meineke and 1-800-Radiator & A/C. The transaction will also include franchises that operate under the Merlin, Pro Oil Change, Econo-Lube N’ Tune, Aero Colours, Drive N Style and AutoQual brand names. The collateral consists of all existing and future franchise agreements in the United States, product sourcing entities, related intellectual property and a license fee from Canadian sub-franchises. The Company has a network of approximately 2,245 locations across all 50 states and ten Canadian provinces.

Provenir is now integrated with Salesforce, (Press Release Rocket), Rated: A

Provenir is a company that automates and simplifies risk decisions and analytics for financial institutions like Klarna, TD Bank, and HSBC on processes like credit scoring, loan origination, and risk on-boarding.

Provenir, provider of risk analytics and decisioning solutions, announces the integration of its platform with Salesforce to improve the execution of complex credit decisioning processes with increased transparency across platforms. Companies that use Salesforce for customer relationship management (CRM) can now connect to Provenir’s platform to run automated risk analytics and decisioning for credit and loan applications, as well as mobile payments and e-commerce transactions — all from within their Salesforce environments.

Provenir risk analytics and decisioning platform is a powerful orchestration hub that can listen across multiple channels, integrate with a wide range of data service and operationalize multiple analytic models.

In January, Comcast Ventures led a $20M financing round for College Ave Student Loans, ( Comcast website), Rated: B

Comment: the article is not really interesting. But the fact that Comcast invested $20mil in a lender is surprising.

Colleg Ave Student Loans is not just refinancing existing student loans after the fact; we’re providing funding for them to complete their education.

 

 

Author: George Popescu

George Popescu

About the author

George Popescu

Serial entrepreneur.

George sold and exited his most successful company, Boston Technologies (BT) group, in 2014. BT was a technology, market maker, high-frequency trading and inter-broker broker-dealer in the FX Spot, precious metals and CFDs space company. George was the Founder and CEO and he boot-strapped from $0 to a $20+ million in revenue without any equity investment. BT has been #1 fastest growing company in Boston in 2011 according to the Boston Business Journal and the only company being in top 10 fastest in 2012-13 as it was #5 in 2012. BT has been on the Inc. 500/5000 list of fastest growing companies in the US for 4 years in a row ( #143, #373, #897 and #1270). After the company sale in July 2014 until February 2015 George was Head-of-Strategy for Currency Mountain ( www.currencymountain.com ), a USD 100 million+ holding company focused on retail and medium institutional currencies, precious metals, stocks, fixed income and commodities businesses.

• Over the last 10 years, George founded 10 companies in online lending, craft beer brewery, exotic sports car rental space, hedge funds, peer-reviewed scientific journal ( Journal of Cellular and Molecular medicine…) and more. George advised 30+ early stage start-ups in different fields. George was also a mentor at MIT’s Venture Mentoring Services and Techstar Fintech in NY.

• Previously George obtained 3 Master's Degrees: a Master's of Science from MIT working on 3D printing, a Master’s in Electrical Engineering and Computer Science from Supelec, France and a Master's in Nanosciences from Paris XI University. Previously he worked as a visiting scientist at MIT in Bio-engineering for 2 years. George had 3 undergrad majors: Maths, Physics and Chemistry. His scientific career led to about 10 publications and patents.

• On the business side, Boston Business Journal has named me in the top 40 under 40 in 2012 in recognition of his business achievements.

• George is originally from Romania and grew up in Paris, France.

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