- Today’s main news: Prosper shutting down secondary market; 3 major banks on their knees; JP Morgan’s deal with Invest Cloud.
- Today’s main analysis: Lending Club’s email to their clients.
- Today’s main thought provokers: How Monzo got 40,000 clients.
- A very interesting email from Lending Club, very smartly written in Patrick’s name and from his point of view. Who’s Patrick ? I commented in line extensively paragraph by paragraph (as today was a slow news day and I had more time).
- 3 banks are on their knees: Wells Frago, Deutsche Bank, and Commerzbank. Two of them are the major banks in Germany. This news is critical for a few reasons. First, it will affect interbank interest rates, which will propagate into all interest rates. Second, if banks who are top lenders like Wells Fargo have to cut cost they will also cut business lines. Which is a great door open for our industry? And last, if this gets worse, it may, in fact, be the beginning of a next Greece-like crisis , except affecting major economies.
- Prosper is discontinuing their secondary market because nobody is using it. I have a lot of thoughts on this and I wish they had reached out to talk about it 1st. I am a frequent user of both Prosper’s Secondary Market and Lending Club’s Secondary market. I wonder if anybody at Prosper is using both ? Here is my takeaway: if I want to sell something at Lending Club the process is simple, clear and I always manage to sell them. I tested and I can sell notes in seconds if I discount 20% the price. On Prosper I tried numerous times and I never managed to sell a single note. Why ? Both platforms are powered by the same legal setup with Folio Investing. So the problem is the process of listing, the pricing and the liquidity. I strongly believe a secondary market is MUST HAVE for these platforms. I deplore that they are closing it down. Please, please let me help launch it right so that you can keep it open.
- JP Morgan signs deal with InvestCloud (not that long after the deal with OnDeck). Dimon committed to spending $300 million over the next three years on digital improvements in asset management.
- Single-Family rentals vacancies inch up a little. I think it is still noise, no new signal.
- How Monzo got 40,000 new clients with hardly any marketing spend? A very interesting process.
- Today I didn’t find any relevant news from other countries, regrettably. I am surprised as well. Please feel free to point us to news worth covering. Our readers in aggregate are by far my best source of news.
- United States
- Update on where Lending Club stands, what we’re working on, where we’re headed, (Email Lending Club), Rated: AAA
- Fines, Withdrawals, Job Cuts. It Was an Ugly Day for Global Banks, (Bloomberg), Rated: AAA
- A Message from Prosper and Folio Investing, (Email, Prosper), Rated: AAA
- JPMorgan Hires InvestCloud In Response to Silicon Valley Threats, (Fortune), Rated: A
- Single-Family Rental Research: Performance Summary – September, (Morningstar), Rated: A
- How startup bank Monzo is using a community-based marketing approach, (Tradestreaming), Rated: A
Update on where Lending Club stands, what we’re working on, where we’re headed, (Email Lending Club), Rated: AAA
Comment: this is an email sent from Lending Club to all clients. It was written in the name of their newly hired Chief Capital Officer, Patrick Dunne.
I wanted to take a moment to introduce myself. I’m Patrick, Chief Capital Officer at Lending Club. I joined the Lending Club team a few months ago. My job is ensuring that all of our investors have a great investment experience at Lending Club. I wanted to provide an update on where Lending Club stands today, what we’re working on, and where we’re headed.”
Comment: I like the direct personal tone and the feeling of approachability by introducing himself as Patrick instead of, the other extreme, which would be Mr. Dunne. As a retail client I relate to this tone well.
Email continues :
“Where we stand today. We’re proud that we have the largest retail investor base of any company in the marketplace lending industry and are committed to expanding our offering so more retail investors can access Lending Club products. Over the past several months, we have focused on strengthening our business processes and steps were taken to enhance asset quality by increasing interest rates and tightening credit criteria for loans. We added some tremendous talent including Sameer Gulati (Chief Operating Officer), Tom Casey (Chief Financial Officer), Russ Elmer (General Counsel), Valerie Kay (Head of Institutional Investors), and Raman Suri (Head of Retail Investors). We also welcomed Tim Mayopoulos (President and CEO of Fannie Mae) to the Lending Club Board of Directors.”
Comment: Outstanding job at building such a team in so short. The only concern would be if the stage Lending Club’s is in matches this new “very large company” team’s experience. This team didn’t build those companies. However Lending Club is not a startup anymore. And it often takes a complete new type of team to take a company from 0 to $1mil in revenue, from $1m to $20m, from $20m to $100m and from $100m to $1bil. So I do think that most likely a “large company” team will turn Lending Club into a large company (with its processes, bureaucracy and more) and perhaps that is what LC needs.
“What we’re working on. For the remainder of 2016, we are focused on serving you better. We’re making investments in reporting, compliance and controls, technology, and the organizational foundation that will drive the next phase of growth.”
Comment: I find it a little vague and predictable.
“Where we’re headed. We have ambitious long term goals. We aspire to allow every type of investor – individual retail and institutional investors – to participate in what we believe is a compelling product that can offer solid risk-adjusted returns. Many more investors of all kinds may benefit from adding Lending Club products to their portfolios, and we’re looking forward to proving that we deserve a place in their portfolios.”
Comment: Many retail investors are concerned that if they are left unprotected institutional investors will have better API connections and technology and they will be left with the notes no sofisticated investor wants.
“Some investors have asked me–after 20+ years at Barclays Global Investors and BlackRock, why did I join Lending Club ? I had the unique opportunity to be a part of the innovative team that created iShares, which today is the global market leader in ETFs. It took many years to grow the iShares business and show investors that it should be a big part of their investment strategy. I see that same parallel with the products we offer at Lending Club”
Comment: There is a tradeoff between salary and equity. Rarely will a salary be a life changing event however it makes people comfortable. People join startups to create a non-negligible probability of a life changing event via equity. They also join to give themselves a challenge when they may be bored. And often at startup/young companies the reward is more proportional to the value added and success.
Fines, Withdrawals, Job Cuts. It Was an Ugly Day for Global Banks, (Bloomberg), Rated: AAA
Comment:These news are critical for a few reasons. First it will affect interbank interest rates, which will propagate into all interest rates. Second, if banks who are top lenders like Wells Fargo have to cut cost they will also cut business lines. Which is a great door open for our industry. And last, if this gets worse, it may in fact be the beginning of a next Greece-like crisis , except affecting major economies.
Commerzbank Chief Executive Officer Martin Zielke announced plans Thursday to eliminate 9,600 jobs
In Washington, came still more blistering attacks on John Stumpf, whose grip atop embattled Wells Fargo & Co., the largest U.S. mortgage lender, remains tenuous amid the uproar over a scandal involving unauthorized accounts.
And then, back in Germany, came the bombshell: revelations that some hedge funds were moving to reduce their financial exposure to Deutsche Bank, now the biggest worry in global finance; sending its New York-listed shares down as much as 9.1 percent
The 38-company Bloomberg Europe Banks and Financial Services Index has tumbled 24 percent this year.
A Message from Prosper and Folio Investing, (Email, Prosper), Rated: AAA
We are writing to let you know that as of October 27, 2016, Prosper will no longer offer the Folio Investing Note Trader platform, the secondary market for Prosper Notes. Prosper has found over time that very few investors are using the secondary market and, as such, has made the decision to no longer offer this service. We apologize for any inconvenience that this causes. Prosper remains committed to its retail investor clients and to providing them a great experience.
Once the secondary market trading service is terminated, you will not be able to sell Notes that you own, and you will need to hold them to maturity.
JPMorgan Hires InvestCloud In Response to Silicon Valley Threats, (Fortune), Rated: A
JPMorgan Chase jpm said it had hired and would take a stake in InvestCloud, which provides software that makes online transactions easier for customers with banking and investment accounts. The InvestCloud deal is also part of Dimon’s commitment to spend $300 million over the next three years on digital improvements in asset management.
Starting early next year, the bank will use InvestCloud to customize website dashboards and mobile apps for clients ranging from individuals with investments of $1,000 to managers of family investment offices with $1 billion or more.
Single-Family Rental Research: Performance Summary – September, (Morningstar), Rated: A
Vacancies increased to 5.0% from 4.8% in July, the first time this metric has touched 5.0% since November 2015. This month’s Performance Summary tracks the performance of 23 single-borrower transactions and more than 90,000 properties. Rents for properties backing single-family rental securitizations in September rose by 5.1% from their prior contractual rents. Delinquencies were flat at 0.6%.
How startup bank Monzo is using a community-based marketing approach, (Tradestreaming), Rated: A
The startup, still in test mode, has added 40,000 new users in under a year by taking a completely open approach to building a product that fits the needs of its customers, which it inevitably calls “Monzonauts.” For instance, Monzo users can submit their needs to an online forum or sound off on Twitter. The company has put its entire product roadmap online, where users can vote on features they’d like to see. For example, a Monzo app for Android devices. After getting 232 votes, this feature rolled out this week.
On its forum, which launched in December, users share tips on things like using a Monzo card abroad. The posts that generate the most discussion in its forum are also included at monthly meetings.
Referrals aren’t new. But they have given Monzo’s word-of-mouth tactics a turbo boost. When users download the app they are added to its waiting list. Those who refer a friend to the service with a unique code are bumped up the queue by 4,000 places. “What we wanted was to get everyone on that list to feel excited about it,” Kursar said. In 48 hours, its landing page received 12,000 submissions.
“We don’t want to become the kind of company where every campaign has 100 different iterations ending with something aggressive that says ‘download, download, download,’” she added.