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June 8th 2016, Daily News Digest

US

  • Very interesting analysis of WebBank, Cross River Bank and Celtic Bank.
  • Renaud Laplanche is trying to partner with PE firms to take Lending Club private. We believe this is unlikely to succeed.
  • Wall Street analysts call Lending Club stock a buy.
  • Bloomber claims Lending Club needs a new leader beyond Scott Sanborn.
  • Lending Club 8-K form details, rates raised on average by 0.55%.
  • Payoff to use eOriginal, a solution beyond electronic signature enables asset sales and securitization.

United Kingdom

  • Largest p2p default ever: Saving Stream’s loan to Aylings Garden for £1,700,000 is in default.

 

United States

How are marketplace lenders’ lenders doing?, ( Banking Exchange), Rated: A

A trio of banks have become increasingly reliant on the digital lending industry as a revenue driver, an unpredictable bet as even the largest platforms scramble to shore up funding.

WebBank, Celtic Bank, and Cross River Bank each have at least four partnerships with digital lenders. Executives at all three banks did not respond to a request for comment.

But the banks still have exposure. WebBank, in particular, stands out as the issuing bank for LendingClub Corp. and Prosper Marketplace Inc., arguably the two largest consumer loan platforms in the space. Though credit risk is minimal, WebBank could see reduced revenue if digital lending collapses, Baker said.

trio of banks exposure to marketplace lending

trio of banks exposure to marketplace lending 2

While no bank is as exposed as WebBank, Celtic Bank has rapidly expanded its digital lending business. The bank reported loans held for sale equivalent to 4.72% in the first quarter, more than double the ratio from the 2015 fourth quarter. And revenue from net gain on sale also exceeded 60% of the bank’s noninterest income. However, when looking at interest income, the bank shows some diversity in revenue as the vast majority comes from real estate loans, not consumer loans as was the case for WebBank.

Celtic Bank’s reliance on digital appears poised to increase as it becomes the sole issuing bank for On Deck Capital Inc., one of just two publicly traded U.S. digital lenders. On Deck had an issuing bank partnership with BofI Federal Bank since 2012, but On Deck disclosed in a regulatory filing that the partnership would expire without renewal this July.

trio of banks exposure to marketplace lending 3

James Friedman, an analyst with Susquehanna Financial Group, said he thinks Lending Club will survive though he agreed the company’s viability is largely dependent on keeping and attracting institutional and retail investors.

“I think, ultimately, investors will come back,” he said,” because investors have to find deals, and that has been the value proposition from the beginning—that these are strong risk-adjusted deals.”

Ousted CEO Laplanche Studies Lending Club Takeover, (Fortune), Rated: AAA

Comment: Because lenders probably lost some trust in Lending Club’s ex CEO and because taking the company private will reduce the transparency the company has to comply with, I believe it is highly unlikely for such a plan to succeed. 

In the weeks following his May 9 departure, Laplanche approached firms about financing a bid to take the company private, the people said. The talks were preliminary and may not lead to a deal, said the sources, who asked not to be named because the matter is private.

Laplanche declined to comment on his future plans. A representative for Lending Club declined to comment.

Department of Justice is probing the circumstances leading up to his departure and the New York Department of Financial Services is separately investigating the company’s business practices. Such regulatory heat could make it difficult for Laplanche to secure funding, one of the sources said.

Lending Club Stock Has Cratered, But Some Parts Of Wall Street Still Say ‘Buy’, ( Forbes), Rated: AAA

Wall Street still thinks that Lending Club’s stock — which has plummeted 60% since the start of the year — is worth buying.

One of the key members of this club is former CEO Laplanche himself: Reuters reported late Tuesday that the ousted founder and chief executive has been speaking to private equity firms about financing a buyout of the company that used to be his.

Other members of the club are Wall Street analysts. In a research note released Tuesday afternoon, BTIG analyst Mark Palmer reiterated both his $9 price target on Lending Club stock (which was trading at half that price during Tuesday’s regular trading hours) and his “buy” rating on the company — a rating that has been in place since before the start of the sturm und drang.

“We believe the value proposition offered by Lending Club’s core business – to generalize, taking consumers out of 19% APR credit cards and putting them into 12% term loans – remains very much intact,” Palmer wrote on Tuesday. “Moreover, in a persistent low interest rate environment, the enhanced yields offered by Lending Club’s loans should help stabilize the company’s investor base.”

“We find it difficult to believe that after the worst financial crisis since the Great Depression, a disaster attributed by many to the actions of a number of financial services firms that involved billions of dollars of faulty securities, resulted in virtually no indictments of such firms’ executives, that Lending Club’s $22 million in misallocated loans would provide fodder for an indictment,” he said.

Optimistic though he is, it’s worth noting that Palmer isn’t the only guy on Wall Street with a rosy view of Lending Club. Jefferson Harralson, an analyst at KBW, also sees the lender overcoming its troubles.

LendingClub Needs a New Leader, (Bloomberg), Rated: AAA

On Tuesday, the most prominent peer-to-peer lender called off its annual shareholder meeting just as it was about to start, saying in a filing that it was “not yet in a position to provide its stockholders a complete report on the state of the company.”

Canceling an annual shareholder meeting is a huge deal. It raises all sorts of questions about LendingClub, which has been shaken by concerns about how it will secure funding for the loans it originates — not to mention concerns about investigations by the Justice Department and Securities and Exchange Commission. Michael Tarkan of Compass Point summed up some of those questions in a note:

Could the company be in the final stages of negotiations for funding and the deal just wasn’t completed in time for the meeting? How much funding would be potentially provided and would any agreement result in significant dilution for LC holders? Was there a funding deal in the works that fell apart at the last minute? Is LendingClub exploring strategic alternatives? Is LendingClub contemplating retaining more risk on balance sheet? Was the company prepared to preannounce lower origination volumes?

Scott Sanborn, who had mostly worked in operations and marketing, was elevated to acting CEO. New Chairman Hans Morris told analysts on a conference call that the board had a lot of confidence in Sanborn and had not yet decided to undertake a CEO search.

That seems like a big mistake. No offense to Sanborn, but the task at hand seems outside his primary skill set and experience. His resume contains mostly jobs focused on marketing to consumers. Before coming to LendingClub as chief marketing officer in 2010, he previously held marketing jobs at eHealthinsurance, RedEnvelope and the Home Shopping Network, according to his LinkedIn profile.

It’s hard to imagine confidence being restored to the firm until it’s led by an executive who can turn things around and represents a break with the past. LendingClub’s board needs to rethink that decision not to search for a new CEO. Otherwise a pioneer could end up as just a footnote in the fintech revolution.

How the NBA is helping its millionaire players stick to a budget, (Market Watch), Rated: A

Personal Capital, an online financial advisory firm, provides free digital financial tools and fee-based investment options. Its partnership with the National Basketball Players Association (NBPA) is only for the former.

Goines said players can get a free financial consultation via phone or the app — the company has 110 advisers, 75 with a series 65 or equivalent — and build a financial plan based on their goals. They can also track spending and their NBA-provided benefits, as well as monitor their investments and fees they’re paying — and theirnet worth — via the app.

Lending Club’s raises rates, 8-K form details, (SEC), Rated: AAA

 

LC raising rates 1

LendingTree Partners with the Innovative Lending Platform Association to Advance Industry Standards, ( PR Newswire), Rated: A

LendingTree announced today that it proudly joins members of the Innovative Lending Platform Association (ILPA) in developing a model small business lending disclosure called the SMART (Straightforward Metrics Around Rate and Total Cost) Box.  The SMART Box will present a small business with a chart of standardized pricing  comparison tools and explanations, including various total dollar cost and annual percentage rate metrics that enable a comprehensive pricing comparison of small business loans.

“The adoption of an industry standard benefits all parties,” said Doug Lebda, founder and CEO of LendingTree. “Lenders benefit from being able to easily and concisely explain their loans.  But, more importantly, borrowers win when lenders are completely transparent.”

With the growth of its small business network, LendingTree has seen first-hand the range of financing products available to small business organizations, and the benefit of common disclosure standards and verbiage to assist loan comparisons. It is LendingTree’s hope that an industry standard such as the SMART Box can increase the transparency for borrowers and help them select the financing solution that best fits a given need or use-case.

Fintech Brief: US Online Lender Vouch Financial Signals Closure, ( Crowdfund Insider), Rated: A

Comment: news date to Monday, however we felt it was worth covering again.

Three years, $11 million in venture funding and $1 million in loans later, online lender Vouch Financial is closing up shop, according to the Wall Street Journal.  The small online lender founded by serial entrepreneur Yee Lee in 2013, makes personal loans based on the premise of a vouching network.  For example, the receive a Vouch loan, at least one person must sigh as a “sponsor.”  People sponsor the loan applicant by choosing an amount of money and agreeing to pay their sponsorship amount if the loan applicant does not pay Vouch back.

Twenty-eight employees are currently listed on Vouch Financial’s website, but no further updates have been posted. Twitter activity came to a standstill on 4 March.

2016 DISRUPTOR 50, ( CNBC), Rated: A

Kabbage’s direct business has provided $1.6 billion in funding to 60,000 small businesses across a variety of industries on Kabbage.com. By the end of this year, the company predicts it will more than double the size of its direct business and that at least a dozen more financial institutions will be using Kabbage’s lending platform.

OnDeck’s Direct Mail Simplifies B-to-B Funding, ( Tarket Marketing), Rated: A

Direct mail that promotes business lending can often be rather dense to read, but not in this case.

To build social proof, this direct mail package leverages endorsements from several sources. First, it highlights its A+ rating from the Better Business Bureau in several locations, including the front of the envelope and the buck slip. Second, it includes several testimonials with names, locations, quotes and photos of business owners .

LendingRobot Doubles Down on Lending Club Secondary Market, Launches “Adaptive Portfolio Rebalancing”, ( Business Wire), Rated: A

LendingRobot announced today a new robo-advisor product for Lending Club, called Adaptive Portfolio Rebalancing (AdPR). The new AdPR product is designed to improve investor returns on Lending Club by actively monitoring user portfolios and the secondary market in search of underperforming or underpriced loans, respectively. LendingRobot’s enhanced model, available only to investors with a minimum $20,000 under management, detects when it is possible to increase returns by offloading a note, or by seizing good opportunities on the secondary market. As with all LendingRobot products, the AdPR model is fully autonomous, without any need for user oversight or action once they opt-in.

“The U.S. Treasury whitepaper on marketplace lending underscored the need for an active and stable secondary market,” said the CEO, Mr. Marot. “We see this product not only as a way to maintain and accelerate that healthy secondary market, but also improve returns for investors that will be better able to capitalize on the increase in secondary market activity we’ve observed in recent weeks.”

Payoff Adopts Fully Digital Financial Transaction Management with eOriginal and Millennium Trust Company, (Benzinga), Rated: AAA

eOriginal, Inc., the experts in digital transactions, announced today that Payoff, Inc. adopted a fully digital financial transaction management solution with eOriginal and Millennium Trust Company. The digital transformation of its processes improves customer experience and enables post-signature asset management within the secondary market.

Payoff approached eOriginal in need of a solution that empowered them to go beyond simple electronic signature functionality to enable asset sales and securitization, while housing the assets in a secure vault. To meet and exceed the challenges of digital transaction management for marketplace lending, eOriginal and Millennium Trust Company delivered an innovative, thorough solution that brings their processes 100 percent digital with seamless platform integration.

Millennium Trust Company serves as the document custodian and re-registers the ownership of the loans from Payoff to their asset purchasers. Because all of the documents are stored electronically, Millennium Trust Company can easily and securely make any necessary changes in their system, reducing the time it takes to manually re-register the assets.

Founded in 1996, eOriginal specializes in the post-execution management of financial asset documentation. eOriginal SmartSign® and eAsset® Management Services enable an end-to-end solution for fully electronic transactions. By treating every transaction as having assets that must be verifiably secure, legally compliant and enforceable, eOriginal provides its customers and partners with eCertainty®.

United Kingdom

Saving Stream’s largest p2p loan default, ( Saving Stream), Rated: A

PBL020 – Aylings Garden Centre, Midhurst,

SECURITY VALUE

£2,430,000

LOAN VALUE

£1,700,000

LOAN TO VALUE

70%

REMAINING TIME

-161 days

MONTHLY RATE1%

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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