LendingClub executives expect slower growth at the neobank for the rest of the year after a strong quarter that marked its ninth straight quarter of profitability. CEO Scott Sanborn also expressed interest in having LendingClub issue credit cards.
LendingClub CEO Scott Sanborn said the neobank is committed to balancing profitability with growth and that the bank will hit the accelerator again if the Federal Reserve stops raising interest rates and "ideally" begins to lower them, if banks reposition their capital and liquidity levels to enable their return to the marketplace, or if the current "oversupply of investment options" subsides.
In their post-call report, Wedbush analysts David J. Chiaverini and Brian Violino said they were adjusting down the company's earnings per share estimates over the long term, although they adjusted up their short-term forecasts thanks to allowances for lower provisions.
"Bank partners continue to pull back from the marketplace despite robust consumer demand, given capital and liquidity concerns," Chiaverini and Violino said. "Plus, many banks are selling consumer loan portfolios at steep discounts, adding supply to an already saturated market."
Second quarter performance
Jefferies and Wedbush both maintained their "buy" ratings on LendingClub stock following the company's Wednesday earnings call.
LendingClub exceeded both the company's own guidance and analysts' forecasts for pre-provision net profit last quarter, achieving $81.4 million in profit compared to the company target of $60 million to $70 million. Its total loan originations tally of $2.0 billion was exactly on par with its own guidance for the quarter.
Sanborn said that the banking side of LendingClub's business remains strong amid lending challenges. Three months ago, the neobank
"As a bank, this is something we are uniquely positioned to deliver for our marketplace investors," Sanborn said. "We've had good initial reception to the program, and we have a solid pipeline of forward interest."
Student loans
Sanborn also addressed a recent Supreme Court decision that
High interest rates could dampen demand for refinancing, which took a hit during the pandemic-era pause in federal student loan payments. "Curb your enthusiasm," one analyst said.
"We currently believe that any impact to the portfolio will be muted," Sanborn said of the restart to loan payments. "That's given a 12-month on-ramp period the government is providing, the many reduced payment options available, and proactive credit actions we've taken to reduce exposure to what we believe are the higher risk segments of this population."
Sanborn added that LendingClub will start educational outreach efforts to ensure that student borrowers understand the size and timing of coming payments and the reduced payment options available to them from the government. LendingClub will also offer hardship plans to debtors "if needed."
Revolving loans
Sanborn said LendingClub will introduce installment lines of credit for existing customers. The loans will be targeted to customers who rack up new credit card balances after getting a credit card consolidation loan through LendingClub.
The loans will also be for customers who didn't pay off all their credit card balances "in the first go," according to Sanborn, as long as they've "demonstrated good payment." Sanborn said the new revolving loan product will also provide a debt management and monitoring dashboard.
Sanborn also said LendingClub has a purchase finance business that offers revolving loans distributed through a partner, and that the neobank "could capture more economics by taking that over."
Sanborn wrapped up by saying that 99% of LendingClub customers have credit cards, and in the long-term, that could be a business the company gets into.
"We know what kind of cards they have, we know what they use them for, so that's certainly something when conditions allow that we would be interested in exploring and we think that our customers would be open to," Sanborn said.
