Daily News Digest Featured News

Monday May 7 2018, Daily News Digest

Morgan Stanley collateral comparison
Source: PeerIQ, KBRA

News Comments

United States

United Kingdom

China

International

Asia

Other

News Summary

United States

Square Funded $ 339M to SMBs in Q1 (deBanked) Ranked: AAA

Square’s small business funding arm, Square Capital, made over 50,000 business loans for a total of $339 million in Q1, according to the company’s latest earnings report. That figure is a 35% increase year-over-year and puts them on pace to break last year’s $1.177B total. OnDeck, by comparison, who is arguably their top rival, made $2.11B in business loans last year.

MSRP 2018-SC1 Resecuritization Deep Dive (PeerIQ), Rated: AAA

A recent Bloomberg article discussed ratings on and the performance of MPL ABS. According to the article, ratings agencies that provide lower loss estimates on ABS transactions tend to do the most business, in part due to the “issuer paid” model. While there is no way to verify “ratings shopping” behavior, we do believe there are a few observations to share to balance the discussion.

Overall loss estimates have tended to lower with successive deals as ratings agencies gain access to longer performance histories. The securitization structures have also been extremely robust – we have seen about 10% of outstanding balance breaching triggers so far.

Deal Deep Dive MSRP 2018-SC1

Morgan Stanley is resecuritizing a portion of the residual tranche of SCLP 2015-1 (SoFi’s first consumer loan ABS) via MSRP 2018-SC1. SCLP 2015-1 had an original collateral pool of $252 Mn and issued $189 Mn in Class A notes. Today $96 Mn of that pool and $51 Mn of the A notes are outstanding. MS is issuing $37 Mn in a Class B bond with an initial CE of 11.2% that is rated BBB by Kroll.

Realized losses on SCLP 2015-1 are at 5.31%, 1.26% below KBRA’s initial estimates. KBRA is also lowering its total cumulative loss estimate on SCLP 2015-1 from 8.5% to 8.0%.

Morgan Stanley collateral comparison
Source: PeerIQ, KBRA
Morgan Stanley bond comparison
Source: PeerIQ, KBRA

New Study From CommonBond Highlights Desire for Help with Student Loans from Employers (Lend Academy) Rated: AAA

The market for student loans has continued to climb. According to data from CommonBond, 44 million Americans currently owe $1.4 trillion in student debt with the average student loan debt in 2016 coming in at $37,172.

Employees with Student Debt by age
Source: Lend Academy; Commonbond

CommonBond’s study included 1,500 workers and 500 human resource executives. Their key findings as provided in their press release are copied below

  • Almost 75 percent of all workers have taken out loans to fund their own education, while 21 percent of workers expect to take out a loan for a child or other family member’s education in the next five years.
  • For employees with student debt, student loan repayment is the most-requested financial wellness benefit; however, human resources teams rank student loan repayment as their third priority.
  • Seventy-one percent of human resources executives see their benefits offering as innovative, compared with 50 percent of employees.
  • Seventy-eight percent of employees with current or future student loan debt want their employer to offer this benefit, and 65 percent of employees over age 55 in these categories want the same.
Amount of Student Debt
Source: Lend Academy; Commonbond

 

Contrasting OnDeck Capital (NYSE:ONDK) & Its Peers (Macon Daily) Rated: AAA

OnDeck Capital (NYSE: ONDK) is one of 29 public companies in the “Nondepository credit institutions” industry, but how does it contrast to its competitors? We will compare OnDeck Capital to related companies based on the strength of its valuation, risk, analyst recommendations, dividends, institutional ownership, profitability and earnings.

OnDeck Capital’s competitors have higher revenue and earnings than OnDeck Capital. OnDeck Capital is trading at a lower price-to-earnings ratio than its competitors, indicating that it is currently more affordable than other companies in its industry.

Lending Club (LC) Set to Announce Quarterly Earnings on Tuesday (The Lincolnian Online) Rated: B

Lending Club (NYSE:LC) will be issuing its quarterly earnings data after the market closes on Tuesday, May 8th. Analysts expect the company to announce earnings of ($0.01) per share for the quarter.

Elevate: Providing Responsible Credit to Non Prime Lenders (Crowdfund Insider) Rated: A

While interest rates may be high, this is necessary to manage the overall portfolio risk. Elevate’s default rate is pegged at around 23% – which is quite a bit higher than a prime credit provider. The online lender recently announced their Q1 results and there services are booming. Elevate more than quadrupled year-over-year net income with 24% revenue growth and new customer growth of 32%. So they must be doing something right.

Better Mortgage Hires Former OnDeck Chief Financial Officer (BusinessWire), Rated: A

Better Mortgage, a digital mortgage company working to improve access to home financing through transparency, honest guidance and zero commissions, today announced that it has hired Howard Katzenberg as Chief Financial Officer.

Student Loan Genius Raises $ 4.7 Million in New Funding (Finovate) Rated: A

Xconomy is reporting that Austin, Texas-based Student Loan Genius has raised $4.7 million in funding. The news was seconded by Austin Business Journal, which added that 11 investors have participated in the round. Both reports – as well as a third from AmericanInno, are based at least in part on a SEC Form D filing, which suggests that the $4.7 million was part of a larger $5.8 million fundraising initiative. As reported, the new capital more than doubles Student Loan Genius’ total equity funding to more than $7 million.

Federal Court Dismisses “Speculative” And “Attenuated” Lawsuit By The Conference Of State Bank Supervisors Over Proposed OCC Fintech Charter (Mondaq) Rated: A

On Monday, a federal district court judge in the District of Columbia issued an order dismissing a lawsuit brought by the Conference of State Bank Supervisors (CSBS) regarding a proposal of the Office of the Comptroller of the Currency (OCC) to issue federal charters to certain Fintech firms. In dismissing the case, US District Court Judge Dabney L. Friedrich held the CSBS did not have standing to sue because the OCC had not yet officially decided to issue charters to Fintech companies. Judge Friedrich explained that the CSBS lacks standing to bring the suit because the harms it alleges are “contingent on whether the OCC charters” a Fintech company, and “[s]everal contingent and speculative events must occur before the OCC” issues such a charter.

Banks are using open source to collaborate, not compete (Tear Sheet) Rated: A

On the consumer side, product and marketing teams in banks in the Zelle network currently face new challenges as their partnership is crucial to their success. And on the backend, when banks began paying attention to blockchain technology (the original bitcoin blockchain was a breakthrough of open-source development), the largest companies including JPMorgan Chase and Wells Fargo joined industry consortia working on open-source blockchains.

Commercial loan slump chips away at bankers’ reluctance to automate (American Banker) Rated: A

Loan executives at the $5.1 billion-asset bank wanted commercial clients’ information in one place, where anyone within the organization could access it — especially from the road on their mobile phones.

In a report aptly titled “The Productivity Crisis in Commercial Lending,” David O’Connell, a senior analyst at Aite Group, found that at 78% of the banks he surveyed, lenders spent at least 30% of their time on noncore job responsibilities. At 46% of those institutions, lenders spent at least 40% of their time on those noncore functions.

commercial lenders

 

Banks say they aren’t profitable enough for tech giants to bother with their business (Quartz) Rated: A

We’re-not-profitable-enough-to-bother-with is an unusual defense, which is why it caught my attention amid the usual distractions at these sorts of conferences (texts, emails, the snack table). The banker cited return on equity, which is a measure of profitability, as proof. FactSet calculates this measure by dividing net income by a trailing two fiscal-period average of total shareholder equity:

Return on equity (%) in 2017
Source: Quartz

Granted, tax cuts and deregulation in the US will make banks there more profitable than before. But Amazon is making so much money selling cloud computing to the financial industry (charging them by the second) that taking deposits or writing mortgages wouldn’t seem worth the hassle by comparison.

United Kingdom

P2P lender joins Finsure and LoanKit panels (The Adviser) Rated: AAA

Peer-to-peer lender RateSetter has joined the panel of Finsure and LoanKit, giving accredited brokers access to its personal and green loan solutions.

As of this month (1 May), more than 1,400 brokers accredited with aggregators Finsure and LoanKit will be able to offer their clients personal loans and green loan products from the growing retail lender.

Financial inclusion in the rich world (The Enconomist) Rated: AAA

A report published in March 2017 by a House of Lords committee estimated that 1.7m adult British residents have no bank account; 40% of the working-age population have less than £100 ($140) in cash savings; and 31% show signs of financial distress.

In Britain such lenders include pawnbrokers, offering an APR of between 25% and 101% for a secured loan; doorstep lenders such as Provident, the biggest, which will charge an APR of 1,558% for a 13-week loan; “payday lenders” such as Wonga, which offer similar rates for a loan to be repaid after 1-35 days in one lump sum; and “rent-to-own” lenders, such as BrightHouse, which offer finance for purchases to be repaid in installments.

Are we seeing the beginning of the end for retail banking? (CL News) Rated: A

At the beginning of this week, the first waves splashed up on the shore as the Royal Bank of Scotland announced the closure of 162 branches throughout the UK, with the loss of 800 jobs. The full list is here if you would like to see if your town is affected.

The robot revolution gathers pace (Money Week) Rated: B

The first wave started a decade ago with the rise of online stockbroking platforms, which brought down dealing costs and sparked a wave of DIY investing. Then came the rise of robo-advisers – a rather daft term to describe what are in effect online wealth managers or advisers.

Now a second wave of new entrants has hit the market. Some big players have launched their own robo products, chief among them being private banks such as UBS and Investec – trusted brands with a great investment pedigree. They tend to focus on wealthier clients, however. Investec has a minimum investment of £10,000, while for UBS it’s £15,000. Another big player is IG and its Smart Portfolio, which has lower fees and a minimum investment of £500 per portfolio. Alongside these sit smaller companies such as Moneybox, Wealthify and Moola. The latest platform, Exo, launched just this week.

China

WeLab joins fintech race to become Hong Kong’s first licensed virtual bank (South China Morning Post) Rated: AAA

WeLab, Hong Kong’s home-grown fintech unicorn, is poised to be among the first batch of companies to apply for a virtual banking license from the Hong Kong Monetary Authority, according to its co-founders.

In the coming weeks, the HKMA is due to issue guidelines for virtual banking regulation based on a consultation in February.

CreditEase becomes Milken Institute’s first Asian Strategic Partner (PR Newswire) Rated: A

Tang Ning, founder and CEO of CreditEase, attended the 21st Milken Institute Global Conference in Los Angeles as both a strategic partner and a speaker, and said on the global capital market panel that driven by technology, the middle class and the high-net-worth individuals, a strong new economic growth can be seen in China these years, adding that China is now entering a new era.

European Union

Taaleri to buy Finnish robo-advisor wealth management firm Evervest (Banking Business Review) Rated: A

Taaleri Wealth Management has agreed to acquire Finnish robo-advisor wealth management firm, Evervest, for an undisclosed sum.

 

The acquisition will add Taaleri with functioning digital platform, which will help to extend service offering for customers.

Subject to approval by the Finnish Financial Supervisory Authority, the deal is expected to complete in the first half of this year.

Will ‘buy now, pay later’ change the in-store customer experience? (Econsultancy) Rated: A

I’m going to preface this by saying that this is something we as a business are working on at the moment at Klarna, so I may be biased. But we’re not the only ones experimenting with new bricks-and-mortar payment solutions – the industry is striving to align in-store with online.

International

The 27 fintech unicorns from around the world (Business Insider) Rated: AAA

CB Insights, which tracks the venture capital industry, recently provided a list of what it believes are all the fintech unicorns in the world — venture capital-backed, private businesses worth over $1 billion.

27. Funding Circle — $1 billion

Why it’s hot: Over £3 billion has been lent across the platform and the company is tipped for a blockbuster European float later this year.

27. Kabbage — $1 billion

Why it’s hot: The company has written over $4 billion-worth of loans and has partnered with Spanish bank Santander.

27. 51 Credit — $1 billion

Why it’s hot: 51 Credit provides risk management and credit advisory services to over 20 major banks working in China, including Citibank and Standard Chartered.

17. Tuandaiwang — $1.4 billion

Why it’s hot: The company has helped individuals and companies borrow $11.4 billion and helped lenders make $335 million in returns.

HQ: Dongguan.

14. Affirm — $1.8 billion

Why it’s hot: The company works with over 1,200 retailers in the US and its technology helps retailers increase average order sizes by 51%. Morgan Stanley and Singapore’s GIC are both investors.

13. NuBank — $1-2 billion

Why it’s hot: The bank has 3 million customers and has raised money from Sequoia Capital, Goldman Sachs, Tiger Global, and more.

HQ: Sao Paulo.

11. Avant — $1.9 billion

Why it’s hot: The company has lent over $1 billion and is backed by the likes of Tiger Global, KKR, and Jefferies.

8. Klarna — $2.5 billion

Why it’s hot: The company processes 800,000 transactions a day and has been used by 60 million people globally. Sequoia Capital, the Silicon Valley fund that backed PayPal, is an investor.

6. GreenSky — $3.6 billion

Why it’s hot: Steven McLaughlin, a former Goldman Sachs banker whose firm advised GreenSky on a funding deal, told Bloomberg in 2016 that GreenSky “is the single best fintech company created in the last 10 years, by far.”

4. SoFi — $4.5 billion

Why it’s hot: Like Zenefits, SoFi struggled with a slew of setbacks in 2017. Allegations of sexual misconduct and loan misstatements forced out founder Mike Cagney. Former Twitter CFO and ex-Goldman banker Anthony Noto is now leading a turnaround of the business.

1. Lu.com — $18.5 billion

Why it’s hot: Lu.com, also known as Lufax, is one of China’s largest online lenders and is tipped for an IPO this year.

WhizCoin ICO (WZC Token): Legit Crypto Lending Rewards? (Bitcoin Exchange Guide) Rated: A

Whizcoin is the latest entrant to the world of digital currencies. The project aims to create the biggest lending program in the world which offers exclusive bonuses as well as passive income on a daily basis for its holders. To realize this goal, Whizcoin has already established a token buyback mechanism that runs on a transparent profit distribution model, and thus enables members to increase the value of their digital coins. All transactions are secured by cryptographic encryption, a feature that also regulates the mining of new Whizcoin.

Unlike other digital currencies, Whizcoin does not require exceptional tech savvy from its users. To trade in Whizcoin, all an investor needs is a mobile or computer with a dependable internet connection.

 

 

 

Australia

Winners from banking Royal Commission (The Bull) Rated: A

The Royal Commission will surely slow the big banks down by adding extra compliance and costs, at a time when they need to be more nimble and aggressive to combat the fintech threat (and benefit from financial technology).
Peer-to-peer lending stocks could benefit if more borrowers look to bypass the banks, but most on ASX are too small and speculative for portfolio investors. Big fintech payment providers, such as Afterpay Touch Group, are a better bet but look fully valued after recent price gains.

Australian Banks Expected To Start Hiking Mortgage Lending Rates (Compare Dinkum) Rated: A

ME, the online lender has decided to raise the interest rate on its variable rate mortgages because it says funding costs have risen. ME is not the first bank to do this, nevertheless the lender hiked its standard variable rate for owner-occupier, principal and interest borrowers. Jamie McPhee CEO of the online lender said higher funding costs and increased regulatory compliance were the main reasons behind its decision to hike rates.

Funding costs are rising

Mr MchPee says over the last few months the bank has seen funding costs steadily rise in response to US interest rates that have been passed on to short term Australian interest rates. Simultaneously, regulatory requirements and industry reforms means that compliance costs are rising as well. ME’s decision follows on the heels of Suncorp which raised its rates in March and also cited higher funding costs as the reason behind its decision.

India

Money lending made easy (News Today) Rated: A

The online trading market has been booming at the moment and money lending has taken various forms. Monexo Fintech Pvt Ltd is one such online peer-to-peer lending company and News Today met up with its founder-CEO, Mukesh Bubna here for an exclusive chat.

Q) Being an online firm, technology must play a big part in your business. Do explain. 
A) Our system is 100 per cent online. A typical transaction has many stages. The normal way is cumbersome. There is the problem of being unserviced and second, you do not know how they will use your document. In our platform, your documents come from you to our system directly. There are no print-outs taken and even in our office, there is no printer. Everything is done instantly. With technology, privacy has gone up, speed will go up too.

Asia

Singapore Fintech CredoLab Secures $ 1 Million Investment from Global Venture Firm Walden International (Crowdfund Insider) Rated: AAA

CredoLab, a Singapore-based fintech provider of mobile-based alternative credit scoring solutions for banks, consumer finance companies, and retailers, announced on Thursday it secured a $1 million investment from established global venture capital firm Walden International. Established in 2016, CredoLab is headquartered in Singapore was previously backed by regional fintech venture capital firm Fintonia Group, and FORUM.

Beenext-backed Indonesian P2P lender Amartha targets to raise Series B round by June (Deal Street Asia) Rated: A

Indonesian peer-to-peer lending platform Amartha has revealed that it is currently in talks with investors to raise a series B round of funding which is expected to be closed in the second quarter of this year.

 

OJK Urges Sharia Finance to Optimize Fintech (Tempo) Rated: B

The Financial Service Authority (OJK) chief Wimboh Santoso encourages the sharia finance industry to continue expanding businesses using the latest technology. One way is by optimizing the utilization of financial technology or fintech.

Africa

Crypto-to-Cash Lending is Growing Quite Popular These Days (Nigeria Today) Rated: AAA

A new business model has formed recently called crypto-to-cash lending and this new financial sector is growing exponentially. The phenomenon follows the modern rise in recent years of peer-to-peer lending offered by financial giants like the Lending Club. Right now there are a few operations that are attempting to break the mold when it comes to this type of lending with projects such as Unchained Capital and Salt Lending taking the lead.

Then there is a new startup called Nexo that plans to provide crypto-infused instant credit to borrowers without the need for credit checks. VCs like the Techcrunch founder Michael Arrington, and others recently pumped $50Mn into Nexo and the company has a security partnership with Bitgo. Nexo believes it will be the first firm to provide instant crypto-backed loans as it states on its website.

Authors:

George Popescu
George Popescu
Allen Taylor
Allen Taylor

Testimonials

default image

"Your daily letter is great!" , Ram , Founder and CEO, PeerIQ

default image

"Hi George - just want to tell you that you are doing a great work with Lending Times;-) Brgds, Kasper" , Kasper, Partner and Co-founder at Dansk Faktura Børs A/S

default image

"I've been following your newsletter for some time now and have been very impressed with the content." Charlie,Co-Founder | Bolstr

default image

"Hey George, I must say I really enjoy your site. It has inspired me to do some changes at our platform and we are the biggest consumer lender in Sweden." , Ludwig, CEO @ Savelend Sweden AB

default image

"Your daily email is very useful. It gives quick update on what's going in the market. Thank you very much for all that info." Yann Murciano, Head of Base Metals Trading at Morgan Stanley

Our daily p2p news digest

Daily News Summary Digest Sent Daily To Your Inbox