Author Topic: Sudden drop in Lending Club loan count on July 1  (Read 11239 times)

lascott

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Re: Sudden drop in Lending Club loan count on July 1
« Reply #15 on: July 04, 2015, 05:46:00 PM »
Funny point. But my LC investment is a lot to little ole' me in my little world! (And when I say me I really was talking about myself.)

Via: https://www.nsrplatform.com/#!/

Graphic: http://i.imgur.com/Y1pwkZR.png


[update]Another source that has the same number for verification.

Via: https://www.lendingclub.com/info/demand-and-credit-profile.action
Graphic: http://i.imgur.com/4JlHJnS.png
« Last Edit: July 04, 2015, 06:07:27 PM by lascott »
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nonattender

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Re: Sudden drop in Lending Club loan count on July 1
« Reply #16 on: July 04, 2015, 05:58:22 PM »
Here's another funny point:

So, let's take Avant for instance...  You know what Avant does on the back end?  It AUCTIONS loan participation to investors.  So, instead of charging borrowers a 5% origination fee or whatever, it holds YIELD AUCTIONS (reverse dutch) for the investors and pockets spreads - can you imagine what a thing like that would do for LC, given the scale it has?  Now, that's not to say that investors (even "institutional") are rational and won't bid the spreads down too far, which is, I believe, what's been happening over there (combined with mispricing, by Avant, on loans with FICOs going down to like 560 - which, btw, they just raised to 600 a week or so ago)...  But, imagine, just for fun, if LendingClub did something only very tiny and incremental like cranking the servicing fee on BILLIONS of dollars by just, say, ~50-100 bip.

The investor market wouldn't blink and LC, through very tiny adjustments at scale, would stand to reap massive windfalls on $B's of AUM.

That's not to say I have any knowledge that they're going to do that - I think that's a ways off - but the potential is always there to crank up profitability, through extremely small tweaks to various fee structure inputs, which, at scale, would yield them massive $'s.

*mega-shrug*
A little nonsense now and then is relished by the wisest men.

Fred93

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Re: Sudden drop in Lending Club loan count on July 1
« Reply #17 on: July 04, 2015, 06:06:48 PM »
The sudden increase to 5000 loans in inventory on the fractional market in late June was an accident.  They spilled too many loans into the fractional market, and raised the inventory too high.  After that happened, LC began sending 90% of loans to the whole loan market.  I assume they did this to lower the fractional loan inventory to a more reasonable level.

July 1,2,3 LC put out 1000 listings every feeding time, ie 4000 listings/day.

Note that was not 1023 one time and 927 the next, etc, but exactly 1000 loans each feeding time.  The only way that could possibly happen is if they had a huge supply, and were metering them out.

This is evidence of great supply.  It is astonishing to me that people read these facts and come up with theories that there is some crisis in supply.  I say nonsense, there is amazing supply.

By the way, suppose about 50% of those listings become loans.  (I don't remember the exact historical number, but its close.)  4000/day x 50% x say 350 days/year = 700,000 loans/year.  (yipes, quite a lot eh?)

700,000 loans/year x $15,000/loan = $10.5 Billion / year

That's huge.  Would be out of line with LC's carefully controlled growth of "only" approximately doubling every year.  For this reason I believe this huge supply is a transient of some sort.

In any case, there is no crisis of supply.
« Last Edit: July 04, 2015, 06:08:31 PM by Fred93 »

nonattender

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Re: Sudden drop in Lending Club loan count on July 1
« Reply #18 on: July 04, 2015, 07:43:46 PM »
By the way, suppose about 50% of those listings become loans.  (I don't remember the exact historical number, but its close.)  4000/day x 50% x say 350 days/year = 700,000 loans/year.  (yipes, quite a lot eh?)

700,000 loans/year x $15,000/loan = $10.5 Billion / year

That's huge.  Would be out of line with LC's carefully controlled growth of "only" approximately doubling every year.  For this reason I believe this huge supply is a transient of some sort.

In any case, there is no crisis of supply.

So, how about some more handwavey math?  I'm so bad at it...

$10.5 Billion / year of originations * 5% orig fee = $525,000,000

Now, it costs something to acquire those loans, do CR pulls, hire people to talk to people etc, so, that's not $525 million of profit...  but,
let's say total acq/servicing cost per loan is $200 (I believe this is high by ~2x, but it probably captures SG&A costs fairly well) per each loan, so, $200 x 700,000 loans = $140,000,000... So, that comes out of the $525mm, leaving $385 million in origination fee revenues...

Add on to that $385 million whatever the hell the math looks like on the per payment 1% servicing fee, as payments roll back in, add in interest on $10.5 billion, let's call it $11.5 coming in the next year, knock it down to $11.25 for early defaults (1% fee per payment - so, even if the loans default, the timing of the defaults comes into play), and that's somewhere around 1% of $11.25b/postorig, for year 1.

Which is like $112.5 million... added onto the $385 million of orig fees... so, we're at $497.5 million dollars... after acq, servicing, labor...

Now, 370 million shares are floating... so...  $497.5mm in revenues looks like an EPS of $1.344... and cash on hand of around $850mm, post-ipo...  Of course, they're busy building new channels, developing new products, staffing up, stealing smart/expensive people, etc.

So, hell, let's knock another $100mm off, just for fun, and call it $397.5mm...  / 370 million shares outstanding to make things fit better.

And, while I'm waving my hands, let's go out to year 2, where, if things progress as they have been, and volume just merely doubles...

Not only does it not just go to $2/sh EPS, the 1% servicing fee is running cumulatively, AUM-like, for ~3 yr period, so, it's more than 2x, as they're not entirely dependent on the origination fees to build revenue growth...  they actually participate in their portfolio growth - via the servicing fee attached to each loan/note...

Am I doing this wrong?  I'm so, so bad at math... ;)

ETA:  Oops, my 5% orig fee assumption is high...  All those super-primes pay very little..  Nevermind, this business sucks, "SELL, SELL!"

*giggle*
« Last Edit: July 04, 2015, 07:52:32 PM by nonattender »
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Fred93

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Re: Sudden drop in Lending Club loan count on July 1
« Reply #19 on: July 05, 2015, 03:09:15 PM »
Well, the 1000 loan feeding times have come to an end.  Guess you won't get rich immediately owning LC stock  ;D

nonattender

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Re: Sudden drop in Lending Club loan count on July 1
« Reply #20 on: July 05, 2015, 04:12:12 PM »
Well, the 1000 loan feeding times have come to an end.  Guess you won't get rich immediately owning LC stock  ;D

I don't do the daily weather - but I do keep some umbrellas upside down... ;)

https://www.youtube.com/watch?v=jwN6xyfUwtM

« Last Edit: July 05, 2015, 04:27:03 PM by nonattender »
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ibonobos

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Re: Sudden drop in Lending Club loan count on July 1
« Reply #21 on: July 06, 2015, 04:36:02 PM »
Anyone notice another erasure of loans today? All the 2day,3day,4dayetc vanished.

lascott

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Re: Sudden drop in Lending Club loan count on July 1
« Reply #22 on: July 06, 2015, 04:56:52 PM »
Anyone notice another erasure of loans today? All the 2day,3day,4dayetc vanished.
Didn't notice which ones but here is BlueVestment's 24hr chart.

http://i.imgur.com/15smh2p.png
Tools I use: (main) BlueVestment: https://www.bluevestment.com/app/pricing + https://www.interestradar.com/ , (others) Lending Robot referral link: https://www.lendingrobot.com/ref/scott473/  & Peercube referral code: DFVA9Y

Fred

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Re: Sudden drop in Lending Club loan count on July 1
« Reply #23 on: July 07, 2015, 03:49:29 AM »
So, how about some more handwavey math?  I'm so bad at it...

$10.5 Billion / year of originations * 5% orig fee = $525,000,000

That's a little off.

LC Q1/2015 revenue (origination + servicing + ....) was only $81MM, with net income of -$6.37MM (a loss).

Source: https://www.google.com/finance?q=NYSE%3ALC&fstype=ii


nonattender

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Re: Sudden drop in Lending Club loan count on July 1
« Reply #24 on: July 07, 2015, 10:14:06 AM »
So, how about some more handwavey math?  I'm so bad at it...

$10.5 Billion / year of originations * 5% orig fee = $525,000,000

That's a little off.

LC Q1/2015 revenue (origination + servicing + ....) was only $81MM, with net income of -$6.37MM (a loss).

Source: https://www.google.com/finance?q=NYSE%3ALC&fstype=ii

Really?  Thanks for letting me know.  Zero, huh?  Well, I better go...

A little nonsense now and then is relished by the wisest men.

Rob L

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Re: Sudden drop in Lending Club loan count on July 1
« Reply #25 on: July 07, 2015, 06:45:10 PM »
Source: https://www.google.com/finance?q=NYSE%3ALC&fstype=ii

Someone help me out with balance sheets 101 (see above link, quarterly balance sheet tab).
Total assets and total liabilities are totally out of whack. Neither simply adds up.
My guess is that the entry: Other Current Assets, Total (shown as -every quarter) is wrong.
Same thing for Other Current Liabilities (not zero but way low).
And I was simply looking to find where the borrower loans and investor notes appear.
Probably should be in these entries, but are they are not there.
Hope the LC IRS filings are more accurate than the Google report, or I'm missing something very basic.
It happens.

Fred93

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Re: Sudden drop in Lending Club loan count on July 1
« Reply #26 on: July 07, 2015, 07:02:15 PM »
Source: https://www.google.com/finance?q=NYSE%3ALC&fstype=ii
Someone help me out with balance sheets 101 (see above link, quarterly balance sheet tab).
Total assets and total liabilities are totally out of whack. Neither simply adds up.

Google has left out an important line.  Suggest you read the balance sheet in the most recent quarterly report (SEC 10Q filing). 

http://www.sec.gov/Archives/edgar/data/1409970/000162828015003709/lc-2015xq1.htm
Balance sheet is on page 2.

rawraw

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Re: Sudden drop in Lending Club loan count on July 1
« Reply #27 on: July 07, 2015, 07:58:52 PM »
LC's balance sheet looks really screwy due to the structure