June 17th 2016, Daily News Digest

United States

Personal Loan Rates Fall, But Not Everyone Got The Memo, (Fox Business), Rated: AAA

Personal loan rates, as measured by Bankrate’s national survey, have been edging lower for more than a month. These are the rates you might find at your neighborhood bank, as Bankrate derives its average by surveying banks and thrifts in the top 10 U.S. markets.

At the same time, a couple of the largest marketplace lenders have announced rate increases within the last several weeks. These lenders are not included in Bankrate’s survey, but as the biggest firms in online lending, they are important players in the personal loan market.

Prosper in late May boosted its rates on average 0.29 percentage points. Last week, Lending Club increased its rates on average by more than half a percentage point in an effort to “boost the attractiveness of the asset to investors.” One analyst says to expect the rate trend to continue for marketplace lenders.

This tale of 2 divergent rate paths spells out the importance of not necessarily taking the first offer presented to you. It might not be the best deal.

Yes, some online lenders are raising rates. But others offer rates that are far more competitive than Bankrate’s own average. That’s why you have to look around.

SoFi markets new deal hard in face of industry woes, ( Reuters), Rated: AAA

Social Finance is looking to sell its debut rated bond backed by personal loans, the first such deal since troubles at rival Lending Club cast a shadow on the online loans sector.

SoFi has undertaken an aggressive campaign to distance itself from Lending Club, widely seen as the leader of the nascent online lending industry, in marketing the deal.

The company held at least a dozen meetings with investors, sometimes without bringing along the two banks – Citigroup and Deutsche Bank – that are bookrunners on the deal.

Investors told IFR that the San Francisco-based company has also been contacting portfolio managers directly via instant messaging as it seeks feedback from the buyside.

They said the company has been highlighting its focus on high-earning professionals and its practice of keeping a sliver of each loan on its own books to keep “skin in the game”.

SoFi’s eight-person capital markets team, which is headed by Barbara Lambotte and Paul Fielding, has been part of the direct engagement, they said.

The novel approach has raised some eyebrows in the market, not least because of the thicket of complicated laws that govern the marketing of securities.

“There are significant rules,” one lawyer who works in the securities industry told IFR. “It’s really dangerous territory.” A senior SoFi executive familiar with the matter confirmed that the conversations took place, but insisted the company had no plans to cut banks out of its marketing process. SoFi’s in-house broker-dealer, SoFi Securities, has been active in selling residual slices of each new securitization to niche investors.

But while other ABS issuers such as GM Financial and GE Capital also cultivate dialogue with bond buyers through their investor relations departments, bankers said, SoFi’s approach was more intense.

Even so, SoFi appeared to be gaining better traction than other personal loan ABS trades sold this year when its deal was announced on Thursday.

Whispers on the single tranche, a 2.3-year US$379.8m class of Single A rated notes, are in the area of swaps plus 250bp-275bp.

Citigroup in March was forced to pay investors 400bp over EDSF on its Single A bond of securitized Prosper Marketplace personal loans, after receiving pushback at 300bp.

United Kingdom

LendInvest takes a step closer to becoming the first UK peer-to-peer lender to float, (Telegraph), Rated: AAA

Peer-to-peer (P2P) group LendInvest has hired veteran financier Stephan Wilcke as an adviser to its board, in a move which takes the company one step closer to floating on the stock market – something no other firms in the UK sector have yet done.

Mr Wilcke was the executive chairman of OneSavings Bank until its flotation in 2014, and was the chief of HM Treasury’s Asset Protection Agency from 2009 to 2012. He is currently chairman of Amigo Loans and a commissioner of the Jersey Financial Services Commission.

The new adviser said he expects to help the firm with its IPO – which remains a long-term ambition rather than an imminent move – as well as regulation.The new adviser said he expects to help the firm with its IPO – which remains a long-term ambition rather than an imminent move – as well as regulation.

Although it is one of a wave of online P2P lenders, LendInvest began life as a more conventional offline lender funded by banks.

“It is one of the few alternative lenders which combines a very solid understanding of credit – which is not that straightforward, it tends to go wrong every 10 to 15 years – together with a more entrepreneurial, tech friendly approach to business, which is why I think they have a good, promising future.”

Resetting the alternative finance agenda, (Instinctif), Rated: A

The announcement by Ratesetter this week that it is diversifying its product range into SME lending has significant potential to accelerate the shifting landscape of the alternative finance sector.

What is clear from Ratesetter is that this a business opportunity that remains hugely unexploited. The issue of SME access to finance is one that shows no signs of abating as traditional banks continue to retrench and, Funding Circle aside, many platforms operating in this area struggle to build scale whilst juggling the financial firepower required to balance supply and demand amongst borrowers.

Another dynamic that Ratesetter’s entry to the SME finance sector may shape is consolidation. Alongside Funding Circle, the business is likely to become a dominant force and “go-to” source for many SMEs given its scale and high levels of brand awareness.

Indeed, for existing platforms there is a very real threat that with Ratesetter and Funding Circle becoming the dominant brands, any SME that cannot find a solution through either platform will fall into one of two camps. Either they will not be creditworthy meaning that platforms servicing them will have to take on additional risk or they will require a specialist product or solution.
 

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