- LendingClub’s new mistake on reporting sales to individual investors. It reported an increase from $22mil to $67mil instead of a decrease to $21mil. 1st week of June came in at $19mil, worst week of the year.
- Prosper planning to start a hedge fund.
- Ron Suber, president of Prosper, said he was aware of “a lot” of his competitors shopping themselves.
- CircleBack Lending hired Jefferies to explore a sale.
- Increase in borrower’s rate raises lender’s appetite.
- Great move: Prosper increase transparency with a montly performance update.
- Lessons learned from MyRichUncle, alt lender that failed in 2008, applied to Better Mortgage: diversify lending capital sources.
- Realty Shares helps finance Mariott Hotel.
- Lending Club : best time ever to be a lender on their platform with less competition and best rates.
- OnDeck feels strong with their hybrid funding approach.
- Amazing data on how marketplace lenders advertise and a very interesting ladder based on Alexa rankings.
- P2PGI announces a share buyback, but officers believe money can be better used to pick up cheap external investments at this time.
- Asset Managers in the UK pick up cheap p2p investments at 15% discount to NAV.
- Lending Works and Zopa names top customer service by Moneywise.
- Lord Doom, also known as Lord Adair Turner, to speak at Lendit Europe in London.
- An interesting article on Indonesian p2p regulation and possible options.
- Chinatou.com to pay back investors $35m in Baiju, a popular Chinese strong liquor.
- Faircent’s CEO supporting regulation.
- P2P lenders trying to raise Rs 2-crore net capital.
- Very good Indian fintech overview with great numbers.
New LendingClub Mistake Shows Loan-Demand Issues Persist, (Wall Street Journal), Rated: AAA
LendingClub Corp. has revised downward a recent spike in weekly loan sales to investors, revealing instead that the company was buying some of the loans itself.
But late Wednesday in a regulatory filing, LendingClub revised lower the listing of loans sold to investors, which it attributed to a mistake. It revealed that the previously stated jump to $65 million in the last week of May from $22 million the week before was actually a drop to $21 million. That continued a decline seen since Mr. Laplanche’s resignation.The revision of the numbers could also add to a concern around transparency and data that emerged when LendingClub’s board said it found instances of disclosure failures under Mr. Laplanche’s watch.
Analysts at Morgan Stanley, who highlighted the volume spike as a positive development in a note last week, said in a note late Wednesday that the revision “underscores the potential risk for further internal control and reporting issues.” They said the new numbers suggest “volumes are weaker but look to be stabilizing.”
The filing updated by LendingClub on Wednesday said that the company “inadvertently included member loans sold as whole loans” and for certain member loans “omitted the amount funded by LendingClub.”
A person familiar with the company said that the incorrect data was related to a new process for tagging loans that are bought by the company.
Loans in the first week of June tallied $19 million, the worst week of the year. That represented a 44% drop from the average weekly volume this year. If LendingClub’s other loan channels—including sales to banks and hedge funds—showed a similar decline, it could portend a big drop in company revenue in the second quarter, as LendingClub earns fees when loans are sold.
The new filing showed that LendingClub had bought $7.2 million worth of the notes itself in the period that was revised in May, the first time that LendingClub has held on to loans rather than immediately selling them to investors.
People familiar with the company’s thinking said LendingClub planned to only temporarily hold the loans, before selling them to investors, to reduce the time that borrowers had to wait for their loans to be funded. LendingClub earlier this week said some loans may take up to 30 days to fund.
Prosper planning to start a hedge fund while LC Advisors’ fights with redemptions, (Peer IQ news cut), Rated: AAA
Prosper Marketplace, gasping for funding amid an investor retreat from the sector plans to start a hedge fund that would purchase and securitize the consumer loans it originates.
The San Francisco company has formed a fund-management unit called Prosper Capital that aims to raise up to $1 billion for the vehicle dubbed Prosper Capital Consumer Credit. Prosper is borrowing a page from rival Lending Club, Which runs a series of hedge funds via its LC Advisors unit.
It remains to be seen whether Prosper Capital can raise substantial sums at a time when investors are having second thoughts about marketplace lending. Consider the LC Advisors, a 6-year-old operation with $1.3 billion under management, faces mounting redemptions requests. Indeed, the fund operator has invoked provisions to slow the pace of withdrawals, and even has suspended redemptions for one of its smaller vehicles.
Prosper is telling investors it would randomly allocate loans to its hedge fund to avoid the appearance of cherry-picking. The plan has apparently been in the works since last year when Prosper sued a St. Louis firm with the same name as its Prosper Capital hedge fund unit for trademark and copyright infringement. In December, the parties settled the case out of court with Prosper Marketplace retaining the name.
Online lending set to see a ‘culling of the herd’, (CNBC), Rated: AAA
There’s going to be a “culling of the herd,” which will help weed out winners and losers, said Pat Grady of Sequoia Capital. Grady is one of the venture firm’s partners and sits on the board of online lender Prosper.
Industry executives’ comments, which came this week at the CB Insights Future of Fintech conference in New York, supported Grady’s statements. Ron Suber, president of Prosper, said he was aware of “a lot” of his competitors shopping themselves.
CircleBack Lending hired Jefferies to explore a sale, ( NY Post), Rated: AAA
CircleBack Lending, one of the dozens of online lending platforms that sprang up in recent years, has hired Jefferies to explore a sale, according to informed sources.
A review of online lenders rate raising to increase appetite for lenders, (Peer IQ weekly email), Rated: AAA
To improve the attractiveness of loans to investors, Lending Club reported last week that they will raise rates by a weighted average of 55 bps across grades, the largest rate increase in its history. Lending Club’s recent rate increase is their fourth since December 2015 (25 bps). Other average rate increases were January (32 bps) and April (23 bps).
Prosper has also raised rates and they expect returns on forward production to exceed 7%+.
The rate increase and a renewed focus on data integrity is welcome news for investors. Raising rates however, is a blunt, imprecise lever. Impacts on customer acquisition costs are unknown at the outset (due to the reduction on Net Converted Response rate), and the impact on subsequent loan performance cannot be observed for months (due to potential adverse selection).
Prosper Performance Update: May 2016, (Prosper Blog), Rated: AAA
In order to help investors further understand performance trends and the Prosper portfolio, we will be regularly sharing information through the Prosper Performance Updates. These updates are developed by our Risk and Capital Markets teams and will provide succinct commentary regarding: (1) portfolio composition (2) gross loss curves (3) delinquency curves (4) pre-payment curves and (5) total payment curves.
- Expected return in our forward production is above 7% as a result of a recent price increase that further enhanced the expected risk-return profit of the product
- Portfolio gross loss estimates relative to FICO (conservatism) remain at or above 2013 levels.Coupon relative to FICO (price to risk) is now between the 2013 and 2014 levels and significantly above 2015 levels.
- Cumulative gross charge-offs increased on a vintage by vintage basis as a result of Q3/Q4 2015 delinquency. We believe the delinquency was a result of environmental changes and created a more pronounced uptick on younger vintages, based on a higher proportion of principal outstanding during the 2015H2 period. Vintages originated in 2015 have shown a steeper slope than those in 2013 and 2014 but remain well below the 2009-2012 experience.
Online Lender’s Secret to Success: Past Failure, (The Wall Street Journal), Rated: AAA
Vishal Garg co-founded an early online lender, MyRichUncle, over a decade ago. In 2009, the company ran aground for some of the same reasons that online lenders are struggling today—lack of investors to buy the loans it was making.
“We were the fastest-growing consumer-finance company in America,” Mr. Garg, 38, said of his former lender. MyRichUncle’s demise and the events that led up to it were “really jarring for those of us that were around.”
Now, Mr. Garg is helming a new effort, online mortgage lender Better Mortgage Inc., which last year raised $20 million in equity from an investor group led by Goldman Sachs Group Inc.
Although shares in publicly traded online lenders have plummeted this year, Better Mortgage late last month was able to raise an additional $10 million in equity at a valuation of $110 million, a roughly 25% premium to what it was valued at last December when Goldman invested.
Better Mortgage tries to connect individual borrowers with investors who fund loans, in contrast to many banks that lend money using their balance sheets.
Mr. Garg was dealing with problems finding money managers to buy MyRichUncle loans eight years ago. He and his high-school classmate in 2004 had launched MyRichUncle’s loan program under parent company MRU Holdings Inc., pursuing many of the strategies employed now by recent startups, including LendingClub.
MyRichUncle had primarily depended on Merrill Lynch & Co. to buy its loans to package and sell them to investors. In September 2008, Merrill and another bank cut off MyRichUncle’s credit lines, forcing it to stop lending. Merrill was sold to Bank of AmericaCorp., and in early 2009 MyRichUncle parent company MRU Holdings filed for bankruptcy. MyRichUncle ended up using its equity to fund those loans, which hastened its demise.
In his new lender, Mr. Garg aimed to re-create the features of the MyRichUncle model that worked—easy online access, quick approvals—while spending less time looking for alternative credit attributes to find the perfect borrowers.
“A lot of things in markets like banking require scale,” Mr. Beyroutey said.
Better Mortgage sells its loans to far more institutions than MyRichUncle did. Buyers include banks such as J.P. Morgan Chase & Co. and nonbanks such as Nationstar Mortgage Holdings Inc. The firm also mostly sticks to established products.
Mr.Garg expects the roughly 75-employee company to be profitable in 2017. By the end of this year, he plans to extend $100 million a month in mortgages—or a $1.2 billion annual pace. By comparison, the smallest company on the list of top 40 mortgage lenders maintained by industry publication Inside Mortgage Finance made over $8 billion in home loans in 2015.
RealtyShares Helps Finance the Purchase of a Marriott Hotel, (Business Wire), Rated: AAA
RealtyShares, the online marketplace for real estate investing that connects accredited and institutional investors to real estate investment opportunities, announced today that it had successfully crowdfunded a significant portion of the outside equity required for the purchase of the Courtyard by Marriott Columbus West in Columbus, Ohio. RealtyShares’ accredited investors used its online crowdfunding platform to raise nearly $1.5 million of equity required for the project.
The transaction took less than 5 days to be fully subscribed.
Investors were also attracted by the Columbus market and its growth prospects. We are proud to have worked with Conor Acquisitions, the sponsor, on this first hotel financing done through the RealtyShares platform.
Conor Acquisitions has planned approximately $2.6 million in renovations to the hotel, to both the interior and exterior of the property, which it believes will result in increased occupancy rates for the hotel” continued Mr. Athwal. “This opportunity offered our investors a chance to participate alongside an experienced sponsor in a sector where we hadn’t earlier participated.
Is The Marketplace Loan ABS Market Just Like The MBS Market A Decade Ago?, (Benzinga), Rated: A
Former Bear Stearns mortgage-backed securities (MBS) trader Perry Rahbar recently wrote about the danger of financial innovation without transparency. Rahbar argued that the MBS market itself wasn’t the problem. The fact that investors didn’t know exactly what they were buying was the real issue. When the MBS offerings got too complex for investors to understand, it opened the door for exploitative behavior.
“With less regulation than banks and no consistent reporting practices across lenders, it’s extremely difficult for investors to figure out what they’re buying and how it’s performing,” Rahbar explained.
Much like MBSs, there is nothing inherently wrong with online-loan ABSs. However, if the market doesn’t maintain transparency, it opens the door for abuse.
LendingClub: Best Time Ever To Be An Investor, But Not A Shareholder, (Seeking Alpha), Rated: AAA
LendingClub’s recent news and stock price meltdown have little effect on operations.
Institutional investors are shying away, leaving more meat on the bones for individuals.
Recent tightening of lending standards should reduce defaults.
Reporting taxes is a lot easier than it was in the past.
OnDeck Maintains ‘Hybrid’ Funding Approach, (Bank Innovation), Rated: AAA
In its latest earnings report, the lender said that only 15% of its originations were funded through marketplace lending, compared with 35% to 45% in the fourth quarter of 2015. The company aims to keep the ratio in the 15% to 25% range for the rest of the year, Hobson said at the Future of Fintech Conference today.
The marketplace lending is going through a “shakeout,” he continued, which will get the bulk of the less established players to close shop, while OnDeck still feels comfortable “navigating through.”
The small business lender originated about $570 million of loans last quarter, up 37% from the same quarter in 2015. Although Hobson said today that OnDeck is now “technically” a unicorn, OnDeck’s market capitalization stands at about $356 million. The stock [ticker: ONDK] has lost 51% of value year to date.
FTC Holds Forum on Marketplace Lending (Deck), (Crowdfund Insider), Rated: A
The Federal Trade Commission (FTC) held its first in a series of forums on Fintech this past week. At the top of the list was the marketplace lending sector.
Self-regulation of marketplace lending does not go far enough, according to a write-up in American Banker. Jessica Rich of the FTC’s consumer protection bureau, said robust procedures, along with “tangible” consequences are needed for online lenders.
Conor French of the Marketplace Lending Association (and GC of Funding Circle) tried to differentiate between online lending and marketplace lending – as they are not necessarily one in the same. French is correct in his statement but the MPL industry has done a very poor job of differentiating their service.
Orchard Platform Announces Bill Ullman as Chief Commercial Officer, (Market Wired), Rated: A
Orchard Platform, today announced that Bill Ullman has been named as Chief Commercial Officer. Ullman has been a senior advisor at Orchard since its founding in 2013. As the founder and principal of Right Wall Capital Management, he has been an investor in and advisor to financial institutions and fintech companies. Ullman will report to Orchard CEO Matt Burton.
In his new position, Ullman will be responsible for global revenue generation and strategic management of the sales, client services and marketing teams. He will also oversee the commercial strategy of Orchard’s products, including Orchard’s online loan marketplace, ensuring they align with the needs of loan originators and institutional investors.
Ullman brings deep experience in the financial services sector. He began his career in 1989 in the Investment Banking Department at Merrill Lynch, focusing on financial institutions. He was a Senior Managing Director at Bear Stearns from 1999 – 2006 in both the Investment Banking and Global Clearing Services/Prime Brokerage departments. He currently serves on the Board of Directors of Van Eck Associates Corporation and the Capital Returns Fund. Bill earned his MBA from The Anderson School of Management at UCLA and graduated cum laude from Princeton University with an A.B. in History.
There’s better opportunities post Lending Club than buying back shares, says P2P Global Investments’ Champ, (Alt Fi News), Rated: AAA
Investors in the P2P Global Investments trust are unlikely to see share buy-backs aimed at bringing in its discount at least until capital is fully deployed later in 2016, according to Simon Champ, manager of the popular investment trust.
The £868m investment trust has been sitting on a discount since October 2015, in stark contrast to its racy double-digit premium evident this time last year. Its discount to net asset value [NAV] today stands at 14.4 per cent, just a touch narrower than its widest level a few months ago of 15.96 per cent.
This has led many investors to anticipate the fund to start buying back its own shares, in order to narrow the discount and yesterday’s Annual General Meeting for the P2P Global Investments trust included a vote on this issue.
Cruickshank, chairman of the board, said in a statement to shareholders that it was in the long term interests of shareholders not to buy back shares at present, even though by doing so would likely benefit their capital in the short term.
“After careful consideration, our current view is that while a buyback would deliver a one-off accretion to shareholders, it would also mean forgoing the multi-year opportunities we see in deepening our relationships with platforms at a time when other, flightier, investors are pulling back,” he said.
“This is a classic example of weighing up the short term versus the long term. Our opinion is that shareholders’ interests, at this time, are best served by implementing the company’s existing strategy.”
P2P GI paid a total dividend of 59.2p per ordinary share in 2015. The ordinary shares delivered a yield of 6.12 per cent on the average NAV for the year, within its target range.
Is it Time to Invest in Peer-To-Peer Lenders?, (MorningStar), Rated: AAA
Star manager Neil Woodford, for example, holds P2P Global and VPC Specialty Lending in the Woodford Equity Income fund, alongside a direct position in lending platform Ratesetter, which forms part of the fund’s unquoted allowance.
P2P Global buys loans from LendingClub, and initially saw its share price fall due to the relationship. The trust’s board responded with a statement, explaining that it does not buy the ‘near prime’ loans that are in question, only ‘prime’ loans from borrowers with good credit scores.
Rob Burdett, co-head of the multi-manager team at BMO Global Asset Management, suggests that peer-to-peer can form a small part of a diversified portfolio – as long as investors understand how it works and what the potential risks are.
The F&C MM Navigator Distribution fund, which Burdett manages alongside Gary Potter, has a 1.4% position in P2P Global.
“We are using it, in part, to plug an underweight exposure to fixed income. It serves a role as a diversifier relative to fixed income,” he explained.
Burdett and co-manager Potter recently increased their allocation to the trust when it was trading at a discount of 16-17%, viewing it as a buying opportunity.
Trevor Greetham, head of multi-asset at Royal London Asset Management, echoes Cassell’s sentiments. If interest rates rise over the next few years, he would expect default rates to increase – posing a potential challenge to the sector.
“My concern is that the peer-to-peer lending vehicles are presented as the next step up from cash ISAs. The interest rates on offer sound like those quoted for a bank account, but this misses that they have risks that have not been tested through the economic cycle,” he added.
Lending Works Named Moneywise Customer Service Awards Best Peer-to-Peer Platform for Savers Winner, (Crowdfund Insider), Rated: A
Lending Works, a UK-based peer to peer lender, announced this week that it has been named Best Peer-to-Peer Platform for Savers Winner at the 2016 Moneywise Customer Service Awards, which is described as the “authoritative stamp of approval by the UK consumer,” recognition is given to financial service firms for providing exemplary service to their customers.
Zopa Dubbed Moneywise Customer Service Awards’ Most Trusted Loan Provider Seventh Year in a Row, ( Crowdfund Insider), Rated: A
Peer to peer lending platform Zopa announced on Friday that it was named Moneywise Customer Service Awards’ Most Trust Loan Provider for the seventh year in a row. The awards event is described as the “authoritative stamp of approval by the UK consumer,” recognition is given to financial service firms for providing exemplary service to their customers.
P2P Skeptic Lord Adair Turner to Speak at Lendit Europe, (Crowdfund Insider), Rated: AAA
Lord Adair Turner, former FSA Chair and pointed critic of the UK peer to peer lending industry is scheduled to speak at Lendit Europe in London this fall. Turner, speaking with the BBC earlier this year, made the statement;
“The losses which will emerge from peer-to-peer lending over the next five to 10 years will make the bankers look like lending geniuses.”
It will be interesting to hear if he will stick to these words speaking to the entire UK P2P crowd.
Regulating peer-to-peer lending businesses, (The Jakarta Post), Rated: A
As the government has not formulated any laws or regulations relating to the P2P lending business, it would be advisable to adopt the most suitable regulatory approaches from other countries.
P2P lending businesses in Indonesia are not classified as banks or financing companies under prevailing laws and regulations. Therefore, the German regulatory option, which obliges P2P lending companies to acquire a banking license, is not applicable in Indonesia.
Moreover, the obligation to partner with banks is also barely applicable given the fact that P2P lending platforms in Indonesia have entered into the market with a principal objective to disrupt and compete with prevailing financial businesses, and therefore such partnerships would not be deemed in accordance with this spirit.
The UK response provides a more streamlined approach. On April 1, 2014, the FCA regulated the lending platforms that were initially regulated by the Office of Fair Trading. This covered the responsibility for regulating loan-based crowdfunding platforms (the FCA Regulation).
Meanwhile, China also shows relevant experience for the Indonesian government. The requirement to form a third-party depository system for customer funds with a qualified banking institution is a positive to be implemented.
As such, the fact that the Financial Services Authority (OJK) is currently taking a proportionate approach to formulate specific regulations for P2P lending should be welcomed.
Struggling Chinese P2P lender offers to repay investors with baijiu, (Financial Times), Rated: A
While China’s state-owned banks plot debt-for-equity swaps to cut bad loans, one struggling peer-to-peer lender has brewed up a more novel plan: repaying its investors in baijiu, the popular Chinese liquor.
Chinatou.com said last week that it was no longer able to return cash to investors following the arrest of its chairman. Instead, it pledged to pay them in baijiu produced by a connected company “to minimise the loss to investors”.
The company, which is based in eastern Anhui province, owed Rmb230m ($35m) to 1,850 investors as of the middle of last month, according to Caixin, a respected Chinese business magazine.
Total debt in China has jumped over the past few years, rising to 237 per cent of gross domestic product in the first quarter of this year, from 148 per cent in 2007.
A story in the Beijing News, a state-controlled media outlet, warned that baijiu was a bad investment choice for investors because the value is hard to assess and it is difficult to sell.
Chinese drink between 10 and 17bn litres of the grain-based liquor — sometimes dubbed “firewater” — each year and a bottle can cost from a few dollars to a few hundred thousand dollars for the best vintages.
Why P2P regulation can be a shot in the arm for the sector, (The Economic Times), Rated: A
Rajat Ghandi, Founder & CEO of peer- to- peer lending marketplace, Faircent.com, personally supports the RBI’s move for these three reasons.
The first overwhelming reason is that in the absence of any regulations or guidelines, there may be untrammeled and uncontrolled growth of the sector.
The second reason why I support regulations is that it explains the roles and responsibilities of each player and assigns them duties and rights to execute them.
The third reason why I support regulations is that P2P sites deal with individual lenders who invest their savings with dreams of earning a decent return.
P2P firms look to hit fund trail to get Rs 2-crore starting capital, (The Economic Times), Rated: A
he Reserve Bank of India’s (RBI) plan to mandate a minimum starting capital of Rs 2 crore for peer-to-peer (P2P) lending platforms has got them scampering for fresh funds.
Hyderabad-based P2P platform Peerlend, which had started operations only four months back, had raised Rs 1.3 crore between May 2015 and February 2016. It has grown a loan book of Rs 42 lakh, and has nine lenders and 33 borrowers registered on its platform. Now, with the guidelines coming in, it is planning to expand its team, improve technology and shift operations to Bengaluru and Vishakhapatnam.
Delhi-based P2P lender Lendbox is running bootstrapped. The platform has grown a book size of Rs 6 crore and has 5,000 investors registered with itself. The total number of borrowers stands at around 10,000. Unlike many other P2P lending platforms, this company does physical verification for every borrower and does credit assessment and underwriting through 200 data points.
“We are already in talks to raise around $2.5 millon. So, if the guidelines for the capital requirement are put in place, it should not be a problem. However, I believe that the capital of Rs 2 crore should have been increased in a phased manner over a period of time to ease the industry into it ,” said Bhuvan Rustagi, chief operating officer of Lendbox.
Mumbai-based P2P platform Lenden Club is also falling short of the mandated capital requirements, and is in the hunt for fresh funds. However, it has got the backing of its existing investors and is confident of crossing the Rs 2-crore benchmark.
Indian Fintech Landscape rises total investment of over US$1.3bn over last three years: Zinnov, (IIFL), Rated: AAA
An exponential rise in the number of Fintech startups over the last 3 years in India with a total investment in the sector crossing over USD 1.3 billion. In terms of cities, Bangalore, Mumbai and the NCR region lead the way as attractive destinations for the start ups.
The report which analyzed over 180+ Fintech startups across India, puts forward insightful revelations on the Fintech sub segments.
A percentage wise split based on various sub segments reveals that the payments segment has the highest number of start-ups at 33%, followed by aggregrators at 29% and by financial services at 15%. P2P platforms, Crowdfunding and Bitcoin start-ups account for the rest.
The report stated that the Mobile Wallet startups have received the most funding over the last 2 years with PayTM alone raising over USD 890 Mn.
With regards to the start ups in the Aggregator segment, the report highlighted that a whopping 50% of aggregator/marketplace startups have come up over the last 2 years. ‘Ease of use’ and the convenience of having a one stop shop for a specific service has been the key determinant of adoption for aggregators. Thus the segment has seen a significant investment of USD 200+ million with 80% of this funding raised over the last 3 years.
The report further established that an interesting sector to look out for in the Indian Fintech startup landscape is the P2P sector, with more than 80% of the P2P lending startups founded over the last 3 years.