Daily News Digest Featured News

Wednesday March 22 2017, Daily News Digest

Lending Club Prosper tax filing

News Comments

United States

  • Prosper reports wider loss on loan slowdown. GP:” The story here is that in 2016 Prosper revenues came down by 33% while expenses rose by 11%. In the same time Lending Club and OnDeck also lost money. A few thoughts: 2016 was a change year for the industry and Prosper who changed board members, CEOs, CFOs. So the Prosper team were aware changes were needed and they are in place. The second part is that it’s unclear at what scale Prosper needs to be to be profitable. Do they need to originate $2bil per year as they did in 2016 , $20 bil or $200 bil? Zopa and other companies showed that in the billions the scale is enough for profitability. Therefore I think it’s fair to expect 2016 to have been the transition year and 2017 to be the poster child year where Prosper and their competitors probably break even.” AT: “Huge drop. Maybe next year will be better for Prosper since payments on its 2013 settlement of a class action lawsuit were to end after three years.”
  • Sofi,Quovo show off new wealth management API.
  • Fitch upgrades CHAI 2016-PM1 Class A, B. GP:” It’s good news on the Prosper securitizations, the ratings got upgraded. This is a good sign to the overall Prosper notes investors.”
  • LC, Prosper tax information for 2017. AT: “You should consult your tax advisor for more specific information and advice regarding your own marketplace lending investments.”
  • SoFi inks office lease in NYC. GP:” SoFi is clearly hiring in NYC or will very soon. If you read Lending Times and are looking for your next opportunity perhaps you should email them a CV and you may beat the crowd.”
  • Would you trust Goldman Sachs with robo-advice? AT: In a few years, no one will think to ask this question.”
  • Deutsche Bank launches tech startup in NYC. GP:”Possibly a good incubator for fintech startups, worth a discussion.”
  • WorldRemit launches in Hawaii.
  • Brooklyn real estate is attractive to China’s middle class. AT: “I would imagine that American real estate is attractive to Chinese investors, even the middle class.”
  • Jilliene Helman on the future of investing. GP:” RealtyMogul has 110,000 investors on the platform. To me that seems very valuable beyond real estate investing. These investors probably need also fixed income and other asset classes allocation.”  AT: “Mostly about RealtyMogul.”
  • CRB names regulatory expert to BOD.

United Kingdom

European Union

  • Circle, Kabbage expand into Ireland. GP:” I wonder why UK lenders have not leveraged their existing fixed costs by entering the Irish market relatively quickly.”
  • Carrefour launches online banking service. GP:” Possibly this is a play for a cheap source of capital for Carrefour? Would US retailers be interested for something similar? How about a fintech startup to help any large corporation launch an online bank? “

International

China

News Summary

United States

Online Lender Prosper Reports Wider Loss on Loan Slowdown (WSJ), Rated: AAA

San Francisco-based Prosper reported an annual loss of $118.7 million, compared with a loss of $26 million for 2015. The company said the bigger loss was due to lower loan volumes and higher costs related to restructuring efforts and a legal settlement.

Prosper’s loss compared with $85.5 million red ink for 2016 at online small-business lender On Deck Capital Inc. and a $146 million loss at online consumer lender LendingClub Corp.

Prosper’s loan volume fell 41% to $2.2 billion as a result of money managers “pausing or significantly reducing” their purchases of the company’s credits,” according to the filing. Prosper makes money mostly from fees it charges borrowers who take out unsecured personal loans, and the slowdown contributed to revenue falling by one-third to $132.9 million.

Meanwhile, expenses rose 11% to $254.2 million.

Sofi, Quovo Show Off New Wealth Management API (Bank Innovation), Rated: AAA

The alternative lender demoed its new Authentication API, built in partnership with Quovo, a financial data aggregator for wealth management, at the FinDEVr conference today.

The API service is available primarily for the U.S., but it does support international accounts; Quovo has served customers in Canada and Australia, as well as clients in Europe.

Fitch Upgrades CHAI 2016-PM1 Class A and B; Affirms Class C (Fitch Ratings), Rated: AAA

Fitch Ratings-New York-20 March 2017: Fitch Ratings has taken the following rating actions on Citi Held for Asset Issuance 2016-PM1 (CHAI 2016-PM1), which is backed by marketplace loans originated via the Prosper platform:

–Class A upgraded to ‘Asf’ from ‘A-sf’; Outlook Stable;
–Class B upgraded to ‘BBBsf’ from ‘BBB-sf’; Outlook Stable;
–Class C affirmed at ‘Bsf’; Outlook Stable.

CE and Liquidity Support: Hard CE for class A, B, and C is 52.7%, 39.4%, and 17.3%, respectively. Liquidity support is provided by a non-declining reserve account, which is currently 0.84% of the pool balance. While subordination available to the class A and B notes will grow as the transaction pays down, overcollateralization (OC) is at its target release level of 16.5%, and will not grow until it hits its floor of 2% of the initial balance ($6.29 million). In addition, a growing proportion of the OC consists of delinquent assets. As a result, the class C notes are particularly exposed to defaults occurring later in the transaction life, which is currently the key constraint to their ratings.

Lending Club and Prosper Tax Information for 2017 (Lend Academy), Rated: AAA

Lending Club has made the process easy if you use TurboTax to file your taxes. They have dedicated part of the help section of their website to outline the step by step process of how to accomplish the import. If you’re not a TurboTax customer, Lending Club has provided a 2016 update to their Tax Guide for Retail Investors.

Lending Club tax filing

 

My 1099-B shows proceeds of $151.17. This is the total amount of proceeds I received from charged off loans. The “Cost or Other Basis” is the cost basis for the loans that have charged off. If you take any proceeds and subtract it from the basis you calculate the losses which is broken down by loan in the tax statement and also totaled at the bottom. In my case I had $366.62 short term losses and $980.52 long term losses totaling $1,347.14 in total losses for the year.

Generally, gains and losses from recoveries, sales or charge-offs related to Lending Club Notes are reported for tax purposes as capital gains or losses, rather than ordinary gains or losses. Generally, Lending Club Notes are considered capital assets because they are owned for the purposes of investment (similar to a stock or a bond).

Filing Taxes on Prosper Loans

Filing your taxes if you’re an investor on Prosper is similar to that of Lending Club. Your Prosper tax documents can be found by clicking on “History” under your name. Next, click “Statements”. Prosper provides each document separately instead of a consolidated report. In my case I received a 1099-OID and two 1099-B documents (one for short term and one for long term). Prosper breaks down what documents you will receive on the help section of their website.

My 1099-OID outlined the interest received of $1,226.42 and below that is my 1099-B outlining proceeds and losses from charged off loans. Although these documents look different than the ones Lending Club provides, the information and how it should be reported on your taxes is the same.

Prosper tax filing

 

Capital losses first offset capital gains. With no capital gains, the losses will be deducted from ordinary income. Depending on your ordinary income tax rate, this means that your capital losses may be offset first by long-term gains that have more favorable tax treatment, usually 15% (depending on your income), as opposed to your potentially higher ordinary income tax rate. Short-term gains on the other hand have a higher tax rate, similar to the ordinary income tax rates (see Capital gains tax in the U.S.).

Online lender SoFi inks pricey office lease at 860 Washington (The Real Deal), Rated: A

The $4.3 billion startup inked a lease at the Meatpacking District’s 860 Washington Street covering the full second floor, which sits level with the High Line and the millions of visitors who traverse the trendy park each year, sources told The Real Deal.

The 10-year lease covers 13,000 square feet of space in the 10-story building developed by Property Group Partners and Romanoff Equities, with 280 feet of frontage along the High Line and West 13th Street. Asking rent in the deal was $155 per square foot.

Goldman Sachs: Would you trust its robo advisors with your money? (Independent), Rated: A

It’s almost always close to the top of the list when companies are seeking advisors to help them out with deals. And it’s not just wealthy and powerful corporations that beat a path to its door. The wealthy and powerful individuals that run them also seek its advice when it comes to their personal finances.

There are a lot of people lower down the food chain that might quite like the idea of showing off about the performance of an investment portfolio created for them by Robo Sachs. Yeah, this new set of golf clubs? Robo-Sachs came through for me. You should try it!

However, a lot of finance houses are working on similar projects, so if Goldman is planning to create Robo Sachs to advise the mass market, it wouldn’t be alone.

Deutsche Bank launches tech startup lab in New York City (Reuters), Rated: A

Deutsche Bank AG (DBKGn.DE) has opened a new center in New York to work with financial technology startups that can help it improve its technology.

Based in Lower Manhattan’s Fulton Center, the lab’s team will help the bank deploy technology in artificial intelligence, cloud and cyber security and other areas, the German bank said on Tuesday.

London-based fintech company WorldRemit launches in Hawaii (Biz Journals), Rated: A

WorldRemit, which was founded in 2010, is available in more than 50 countries and allows users to send money to more than 140 countries.

For China’s middle class, Brooklyn real estate offers more than a green card (CNBC), Rated: A

Since the Great Recession, snapping up prime real estate in coastal American cities, sometimes sight unseen, has become an increasingly popular sport with China’s wealthy. In 2014, for the first time, the Chinese bought more Manhattan apartments than did the Russians, according to Reuters. The strength of the U.S. dollar compared to the fragile yuan is making China’s middle class a major force in the Brooklyn real estate market. The existing cultural infrastructure of its Chinatowns aside, the potential profit margin of owning property in Brooklyn’s up-and-coming areas is hard to beat.

Despite the $50,000 cap, China’s foreign direct investment in the United States hit a record $45.6 billion in 2016, according to a report by the Rhodium Group, a policy group that tracks global economic trends. That figure is triple the recorded amount of FDI that flowed from China to the United States in 2015, making the United States the world’s largest recipient of Chinese foreign direct investment.

For Chinese real estate investors who can’t reach the $50,000 level, or the combined $500,000 that often leads to working with a broker, smaller sums can now be invested through real estate crowdfunding platforms.

RealtyMogul’s Cofounder & CEO Jilliene Helman On The Future Of Investing (Forbes), Rated: A

Since launching, the company has funded more than $260 million in real estate transactions and raised more than $45 million from notable investors, including Canaan Partners and Sorenson Capital.

Helman has underwritten over $5 billion of real estate and was previously a vice president of Union Bank, where she spent time in wealth management, finance and risk management.

Jilliene Helman:We’ve done $260 million in transactions and we share the results of all of those transactions. Newer platforms don’t have the track record and history, nor the processes, as a result.

We’ve built our own internal real estate software to help analyze the credit quality of real estate investments.

We have over 110,000 investors on our platform which allows us to have more capital to place with real estate companies.

Our first REIT, MogulREIT I, is a public non-traded REIT. That means that it is registered with the Securities and Exchange Commission, but is not traded on a stock exchange.

We spend over $1 million annually on data and technology to bring the most thorough credit analysis and underwriting to each investment opportunity.

All investments are carefully analyzed across four dimensions:

  1. People
  2. Location
  3. Property
  4. Third Parties

Cross River Names Regulatory Expert David Cotney to Board of Directors (BusinessWire), Rated: B

Cross River today announced the appointment of David Cotney to the bank’s Board of Directors. Mr. Cotney joins a team of experienced banking, regulatory, business and technology leaders who work with Cross River’s executive management team to provide the bank’s strategic direction and regulatory compliance framework.

Mr. Cotney holds a Masters of Public Administration from the John F. Kennedy School of Government at Harvard University, and an MBA from Boston University. He is a graduate Tufts University where he earned a BA in Political Science.

United Kingdom

What’s an IFISA? Many UK Investors Don’t Have a Clue (Crowdfund Insider), Rated: AAA

Crowdstacker, a peer to peer lender that has received the necessary regulatory approval and is offering the IFISA, says that recent research indicates that about half of investors have never heard of an IFISA.

Crowdstacker found at the top of the list of investment priorities included fixed income (17%), the opportunity to self-select how and where their money is invested (18%), and tax efficiency (24%). About 50% of savers are unaware of IFISAs with 29% uncertain as to what an IFISA is (but may have heard the name) and 5% indicating they understand the IFISA well enough to explain it to others.

UK bank Tandem loses licence after funding blow (Financial Times), Rated: AAA

Tandem, which is set to launch in the coming months as a mobile app-based bank, was due to receive £29m from House of Fraser, the UK department store chain that was bought by China’s Sanpower Group in 2014.

However, the bank said on Monday that House of Fraser had pulled its funding due to “uncertainty about whether China’s State Administration of Foreign Exchange would approve the transaction”.

Tandem said it was still planning to unveil its app in the coming months, with the aim of helping people manage their money by categorising their spending. The bank is planning to offer credit cards later this year.

How a rise in institutional funds has changed the P2P lending landscape (Bridging&Commercial), Rated: A

A many-to-many model that works well and in which – much like the US experience – the lender base has changed quite a bit since it started. These online exchanges mostly appeared following the 2008 financial crisis to alleviate the shortfall in lending to individuals and were viable as a result of low-cost technology and fair margins. P2P today embraces lending to SMEs, student loans, personal credit and real estate lending.

Relendex launched its platform in 2013, so can claim to be one of the veterans. When platforms first start, they need to attract retail lenders (individuals) because institutions aren’t interested in these platforms until they scale up.

In the US, Lending Club started out with only retail lenders: the man or woman in the street looking for a return on their capital. Eventually the institutions began to take an interest in the space, and for good reason. First, the returns were good (averaging around 9% back then). Second, there was a good portfolio spread across thousands of personal loans (mostly from refinanced credit card debt) and the institutions didn’t need to do any administration to achieve that return. What’s not to like?

In the UK, that trend towards institutional lenders has also become evident. Some platforms even have the UK government or local authority funds as co-lenders. Investment trusts have been created just to lend through P2P platforms.

RateSetter recruits Richard Sollis as business development manager (P2P Finance News), Rated: A

RATESETTER’S commercial and residential property arm has appointed Richard Sollis as a business development manager.

Sollis (pictured) joins RateSetter Property Finance from Santander and will be based at the platform’s London office, taking on responsibility for the South and South West England.

RateSetter signs up to Women in Finance Charter (P2P Finance News), Rated: B

RATESETTER is among the latest round of firms to sign up to the government’s Women in Finance Charter, which aims to tackle gender inequality in financial services.

The ‘big three’ peer-to-peer lender is one of 122 firms that have now signed up to the Charter, employing over half a million people in the UK and covering almost 50 per cent of the financial services sector.

RateSetter is the second P2P lender to sign up to the Charter, alongside Landbay who joined last year.

Headache for savers as inflation soars to three-and-a-half year high (P2P Finance News), Rated: B

Figures from the Office for National statistics showed that UK inflation rose to 2.3 per cent in February, up from 1.8 per cent in January, exceeding analyst forecasts of 2.1 per cent.

“This might prompt more people to consider putting their money to work, by taking on some risk in order to earn a better return through peer to peer lending.”

European Union

Ireland’s fintech community grows as Circle and Kabbage to expand (Irish Times), Rated: AAA

Ireland’s fintech community is set to expand as social payments firm Circle announced plans to double its Irish workforce, while US firm Kabbage said it intends to base its European headquarters in Dublin.

Kabbage, a Georgia-based online financial technology company that provides funding through its automated lending platform, on Tuesday confirmed plans to set up shop in Ireland after one of its key investos secured a €50 million investment from a major State fund.

US private investment firm Reverence Capital Partners said it intends to create a number of high-quality financial services jobs in Ireland through its portfolio of companies following the investment from the Irish Strategic Investment Fund (ISIF), a State body controlled and managed by the National Treasury Management Agency (NTMA).

Separately, digital currency start-up Circle is to double staff numbers at its Dublin office over the next two years following a 300 per cent quarter-on-quarter increase in new customer acquisitions in the wake of its recent international expansion.

French retailer Carrefour launches new online banking service (Reuters), Rated: A

French retailer Carrefour on Tuesday joined the crowded French online banking field with the launch of C-zam, a current account for anyone over 18 that can be opened on presentation of two identity cards and activated online in 10 minutes.

Plassat said this month that Carrefour targeted a group business volume of 4 billion euros ($4.3 billion) from E-commerce by 2020 against 1.2 billion in 2016.

International

Klarna Brings Instant Financing Options To Shopify’s Online Merchants (Payment Week), Rated: AAA

Good news for thousands of online merchants in the U.S., U.K., and several other European countries, as they can now offer instant financing options to their customers courtesy of an integration between Klarna and Shopify.

Depending on the particular country involved, these options include flexible or fixed rate monthly payments, promotional interest rates and in Europe, the chance to delay payment for nearly 14 additional days at no extra cost.

According to PaymentsSource, countries include the U.S., U.K., Austria, Sweden, Norway, Finland, Denmark and the Netherlands.

China

Marketplace lending ABS in China and US show different credit challenges and strengths (Moody’s), Rated: AAA

Moody’s Investors Service says that the marketplace lending sectors in both China and the US have shown differences in their development and prevailing characteristics, while both have also experienced a string of governance and misconduct issues over the past two years that have marred investor confidence.

Moody’s Investors Service says that the marketplace lending sectors in both China and the US have shown differences in their development and prevailing characteristics, while both have also experienced a string of governance and misconduct issues over the past two years that have marred investor confidence.

In China, marketplace lending ABS may be exposed to commingling risk, while in the US, deal structures include features to mitigate such risk. In addition, in China, such ABS are exposed to set-off risks, while in the US, such risks do not exist.

Furthermore, peer-to-peer (P2P) lending is still a significant part of the Chinese marketplace lending sector, but less so in the US.

Explaining the recent drop in P2P lending in China (The Asset), Rated: AAA

p2p lending china

Authors:

George Popescu
George Popescu
Allen Taylor
Allen Taylor

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