LC is going to do their own securitizations

[AnilG]

I believe GS will get into marketplace lending through acquisition. GS already solved lender side by acquiring GE Capital Bank, a source of low cost capital, the main challenge for standalone marketplace lending platforms. GS only need online borrower channels and online servicing platform.

Wonder what ever happened to the story that GS is planning to go into the marketplace lending business themselves?

[Fred93]

GS and Jefferies are classy names to have as partners.

Wonder what ever happened to the story that GS is planning to go into the marketplace lending business themselves?

http://lending-times.com/goldman-sachs-names-mosaic-their-p2p-lender-and-hires-team/

http://www.crowdfundinsider.com/2016/04/84721-goldman-sachs-gsbank-may-use-deposits-to-support-mosaic-p2p-lending-platform/

[Fred93]

I suppose these loans will be coming from whole loan program and thus take precedence over retail investors. Hopefully they don't pick all the good ones and leave us what's remaining...

Two things.

1. RL has often said that the retail lenders are important because they'll stick around during an institutional money downturn.  Now there's been such a downturn, so the threat that RL spoke about has been demonstrated.  Recent events reinforce the importance of the retail market, at least to those who understand this, such as the guy running LC.  Therefore he won't do this in a way that damages the retail market.

2. I don't think securitization guys will ever "pick" loans.  They don't think that way.  They will select broad categories, perhaps "all", or perhaps filtered by a FICO range, so they can give them some big name like "super prime".  They would never filter on something like an LC grade, because the institutional buyers sitting at their Bloomberg terminals have never heard of LC grades, and really don't want to know.  They have heard of FICO, as it comes up in all their prior work with mortgage bonds, etc.  Gotta have something this buyer can understand, can explain to his boss, to the investment committee, etc.  (decreasing knowledge of LC details as you go up the chain)  So no, the chance that they will "pick all the good ones" is ZERO.

[Rob L]

Fred93 thanks for bringing me up to date. It's not hard to figure out where GS is going with this.
They bought the old GE Capital and now we have, among other things, the online GSBank. It's pays the highest rate of any FDIC insured savings account I know (1.05%) and has about $16B in deposits for starters. So, GS sets up their own equivalent of LC, funds all the loans themselves from deposits and keeps the loans on their books. Or GS doesn't have to keep them. They can securitize them, sell them off, and repeat. Doesn't matter.

Other banks have been buying LC whole loans for years, BUT, the FDIC required them to perform due diligence as if they underwrote the loans in the first place. They would evaluate whole loans released at LC release times, not unlike we retail folks do for fractional loans, and buy the ones that met their due diligence criteria. Since GS will be underwriting all the loans then they meet the FDIC criteria by definition. Bottom line GS pays 1.05% on deposits and earns whatever% from the marketplace loans. Depositors are happy because 1.05% FDIC insured is as good as it gets (maybe GS even up's it along the way) and GS makes the spread using OPM. If they securitize and sell they can issue riskier loans. The ones they keep would probably be what LC calls A loans.

PS: Since they are a national bank they wouldn't have the Madden problem either.

[Rob L]

I believe GS will get into marketplace lending through acquisition. GS already solved lender side by acquiring GE Capital Bank, a source of low cost capital, the main challenge for standalone marketplace lending platforms. GS only need online borrower channels and online servicing platform.

If LC's quarterly performance doesn't meet investor expectations tomorrow who knows where the stock will go. What would GS pay to buy the best in class market lending platform?

[Fred93]

Bottom line GS pays 1.05% on deposits and earns whatever% from the marketplace loans. Depositors are happy because 1.05% FDIC insured is as good as it gets (maybe GS even up's it along the way) and GS makes the spread using OPM.

Sounds fine, but there's one question bugging me: Why don't all banks do this?  They used to do this.  They've been winding down their consumer lending, allowing the new marketplace lenders to fill the void. 

[Rob L]

Sounds fine, but there's one question bugging me: Why don't all banks do this?  They used to do this.  They've been winding down their consumer lending, allowing the new marketplace lenders to fill the void.

Maybe the costs of entry requires national rather than regional presence. Too costly for the regionals to build a platform and looks like small potatoes to the nationals? GS thinks maybe not so small potatoes. After all GS is coming off a terrible quarter and is searching for the next new thing(s) to innovate and move forward. I wouldn't bet against them.

[P2PFact]

Sounds fine, but there's one question bugging me: Why don't all banks do this?  They used to do this.  They've been winding down their consumer lending, allowing the new marketplace lenders to fill the void.

The bank charter and FDIC insurance guarantee don't come free. As a bank you need to comply all the regulatory requirement including Basel III, IV, CCAR, Volcker, FRTB, and the list keeps growing. GS already has infra/cost to meet these requirements. Another way to ask the question is why not LC does the same thing GS does. Offering saving account at 1% and lend the money out and make a nice profit on spread. And no need to worry about WebBank going under.

[AnilG]

Why would GS acquire a market lending platform? If GS is going to be sole lender, lender servicing platforms like LC are of no use. What GS needs is online borrower acquisition channel, something like CreditKarma.

If LC's quarterly performance doesn't meet investor expectations tomorrow who knows where the stock will go. What would GS pay to buy the best in class market lending platform?

[newstreet]

Its very simple.  LC does not have enough buyers so they have to securitize.  There original business model is not panning out.

Looks like Prosper is hitting the skids-shutting down healthcare and laying off around 100 people.  Good thing their execs cashed out at last round.

I remember your id, and several others - you guys are shorting LC, right? You guys disappeared for a while since LC beat estimate and raise forecast in last ER.
I will say you should just leave - we are discussing LC as retail investors, and look at yourselves, what have you contributed except malicious interpret of everything?
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This was probably an expensive lesson for you.