Release Date: October 23, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- LendingClub Corp (LC, Financial) reported a strong quarter with originations growing 6% sequentially to $1.9 billion and revenue increasing by 8% to over $200 million.
- The company successfully acquired a $1.3 billion portfolio of previously sold loans, which is expected to be immediately accretive to earnings.
- LendingClub Corp (LC) welcomed back banks to its platform, with expectations of over a billion dollars in additional loan purchases over the next 12 months.
- The company acquired technology from Tally to enhance its credit card management solutions, accelerating its product roadmap.
- LendingClub Corp (LC) launched a new savings product, Level Up Savings, which has already gathered over $500 million in deposits, providing a new lever for managing deposit costs.
Negative Points
- The provision for credit losses increased to $48 million from $36 million in the prior quarter, driven by higher day one CECL on held-for-investment loans.
- Net interest margin slightly decreased to 5.63%, primarily due to growth in senior securities from structured certificates.
- Non-interest expenses increased by $4 million to $136 million, with expectations of further increases in the fourth quarter.
- The company anticipates a potential decline in the balance sheet in the next quarter before resuming growth in 2025.
- Despite improvements, loan sale pricing is still below historical averages, limiting the ability to fully reopen dormant marketing channels.
Q & A Highlights
Q: Can you provide details on the improvement in loan sale pricing this quarter and expectations for future pricing?
A: Drew LaBenne, CFO: The improvement in loan sale pricing was driven by three factors: consistent loan performance, a favorable interest rate environment, and better pricing leading to a mark on the remaining held-for-sale portfolio. We expect continued improvement in pricing as rates move lower and more banks re-enter the market.
Q: What are banks looking for in terms of loan products, and how does pricing differ between seasoned and whole loan sales?
A: Drew LaBenne, CFO: Banks have different risk and return profiles they want on their balance sheets. The extended seasoning program allows us to offer seasoned loans, which can jumpstart a bank's portfolio. Pricing for seasoned loans can be tighter due to better credit expectations.
Q: Can you elaborate on the capabilities expected from the Tally acquisition and its impact on future volumes?
A: Scott Sanborn, CEO: The Tally acquisition accelerates our debt IQ roadmap, providing customers with tools to manage credit card debt effectively. This will enhance customer engagement and potentially increase loan volumes as customers see the value in consolidating debt with us.
Q: How do you decide where to place loans during a quarter, and what factors influence this decision?
A: Drew LaBenne, CFO: Decisions are based on a mix of pre-quarter estimations and in-quarter adjustments. We balance filling orders with retaining loans for balance sheet growth, considering price optimization and the evolving earnings profile.
Q: What is driving the renewed interest from banks in purchasing loans, and how do interest rates and credit outlooks factor into this?
A: Drew LaBenne, CFO: Banks are interested in our asset class for its high yield and short duration. As rates lower and banks find more capital and liquidity, we expect more banks to return to the market, attracted by the asset class's benefits.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
