LendingClub
The San Francisco-based company, which primarily refinances credit card debt, has seen revenue
"[Bank investors are] all signaling a desire to return to the platform, and the appeal of a high-yield, short-duration asset is very clear to everybody in this environment," Sanborn said. "However, their ability to commit to the timing of that was notable…A lot of these partners are going to need to shrink to grow and it could take some time. So we really wanted to set ourselves up to be able to be consistently profitable, without bank participation."
LendingClub laid off 172 employees, it announced this quarter, a decision the CEO said was driven by the uncertain timeline of bank demand. The recent cuts,
In the third quarter, LendingClub brought in total revenue of $200.8 million, down from $232.5 million the previous quarter, and from $304.9 million the previous year. The company's stock dropped 2.5% to $6.90 on Thursday, following its third quarter earnings call.
However, as one of the few neobanks with a bank charter, LendingClub has been able to tap its banking capabilities by debuting structured certificates, two-tiered private securitizations in which LendingClub retains the senior note on its balance sheet and sells the residual certificate to an investor. The structured certificates offer marketplace loan buyers access to returns, and bring in interest income for the company.
The company originated $450 million in structured certificates, primarily to asset managers, doubling its issuance from the previous quarter. Sanborn said LendingClub plans to double its issuance again in the fourth quarter, and has close to $2 billion of signed orders for over the next six months.
The recent round of terminations comes after the neobank cut 225 employees in January.
"Not only are structured certificates helping us to attract new investors, they're also helping us make efficient use of capital and reposition the balance sheet to capture low risk interest income off of the senior note," Sanborn said on the call.
The certificate program seeped across LendingClub's quarterly performance: assets increased to $8.5 billion from $8.3 billion, deposits rose from $6.8 billion to $7 billion and loans and leases held for investment decreased from $5.6 billion to $5.2 billion as structured certificates took the place of those loans. LendingClub originated $1.5 billion in loans.
Vincent Caintic, an analyst at Stephens, said in an April interview that LendingClub was rolling out the structured certificate program at the right time, in light of the bank crisis.
John Hecht, an analyst at Jefferies, wrote in a note following the third-quarter call that LendingClub's marketplace originations beat his estimates, despite limited investor demand in buying loans, due to the structured certificate program. Sanborn said he expects the marketplace advantage to return when the rate environment shifts.
Hecht added in the note he also thinks LendingClub has room to grow in the long term as market conditions improve.
"As a first mover in the fintech space with a deep operating history, bank charter and tech-enabled lending platform, LC maintains an important competitive advantage, including a proven profitable business model, when compared to peers in its space," Hecht wrote.
