Author Topic: Lending Club Loan Demand  (Read 12265 times)

rawraw

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Lending Club Loan Demand
« on: June 10, 2016, 10:39:31 AM »
Did this get posted? LC is already using their cash for loans.

http://www.wsj.com/articles/new-lendingclub-mistake-shows-loan-demand-issues-persist-1465565247

The new filing showed that LendingClub had bought $7.2 million worth of the notes itself in the period that was revised in May, the first time that LendingClub has held on to loans rather than immediately selling them to investors.


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jz451

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Re: Lending Club Loan Demand
« Reply #1 on: June 10, 2016, 11:19:09 AM »
That's rather disheartening to read, even if they only intend to hold the loans for 30 days.

SLCPaladin

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Re: Lending Club Loan Demand
« Reply #2 on: June 10, 2016, 01:08:16 PM »
Aarti Shahani over at NPR doesn't seem to think this is bad. In fact this is one of the two take-aways that he emphasizes should come from the LC fall-out:

http://www.npr.org/sections/alltechconsidered/2016/06/10/481474919/with-lending-club-disgraced-an-industry-looks-for-lessons

From the article:

Quote
A smaller rival of Lending Club has a different takeaway. According to Al Goldstein, CEO of Chicago-based Avant, the problem is the business model itself: Lending Club makes money by being a middleman — pairing investors and borrowers. If Lending Club had its own money in it — if the company weren't just a platform for other people's money — he says it would be a lot more rigorous at managing that money.

"If the online lending companies actually have skin in the game, and were holding loans, they would have substantially more at stake to make sure that their processes were sound," Goldstein says. "And you wouldn't have the same kind of issues that we've seen happen."

Removing those stakes, he says, also makes it easier for a company to justify bending rules to hit ambitious targets.

It seems that most people on the forum don't want LC buying loans, mainly because they feel that it will directly compete with retail investors and it may push LC to pursue different types of loans to suit their preferences. I am different in that I think they should hold loans, but only if it follows pre-defined, random allocation and is completely rule-based. They also need to have a sufficient capital buffer so that they don't run down their war chest buying their own loans.

rawraw

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Lending Club Loan Demand
« Reply #3 on: June 10, 2016, 01:15:03 PM »
Buying loans reduces cash, which is what standing between LC and an inability to continue to fund their operation. It also adds credit risk and potential moral hazard to the system. If they have to fund those mailings, this is probably the short term solution until they get back in equilibrium

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anabio

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Re: Lending Club Loan Demand
« Reply #4 on: June 10, 2016, 01:55:27 PM »
"And you wouldn't have the same kind of issues that we've seen happen."

Won't have same kind of issues...?? Hmmm how about different kinds of issues:

LC manager: Huh? a note is overdue?  Is it one of ours?
Yes? Well lets assign this to our "special" collections department.
Oh...and let's just forgo the extra service fee's (don't want to eat into our interest do we...heh.heh.heh)
Oh...and let's make sure we charge the borrower that late fee. It'll sure be nice to get a little "extra" this month.

No? not one of ours?
Hey, let's tone down our response. Don't contact them...or if we call don't leave messages. We don't want to upset our clients. Huh? what about our "other clients?" ... well yes they are important but it sure appears to me they are still buying our product so there's probably still a little more we can squeeze out of them.
Oh...and make sure we charge that extra service fee...and by the way...let's forgo that late fee--don't want to upset our most important client do we? So what if the service fee is more than the interest the lender got...he signed up with us knowing full well we could do this stuff so "caveat emptor" as is were.

Oh...and if we lower our interest rate let's not send invitations to the borrower suggesting he refinance...after all we don't want to have to go through the 30+ days of having our money idle while another loan closes...and suffer a reduced interest rate.
As Will Rogers stated: : I'm not as concerned about the return on my money as I am the return of my money

Fred93

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Re: Lending Club Loan Demand
« Reply #5 on: June 10, 2016, 03:11:52 PM »
Did this get posted? LC is already using their cash for loans.
http://www.wsj.com/articles/new-lendingclub-mistake-shows-loan-demand-issues-persist-1465565247
The new filing showed that LendingClub had bought $7.2 million worth of the notes itself in the period that was revised in May, the first time that LendingClub has held on to loans rather than immediately selling them to investors.
B
Nonsense.  Doesn't mean what you and the author of that article think it means.

LC did $2.5 Billion in loan originations last quarter.  $7.2 Million is so tiny relative to the origination rate that it simply could not be a new program to buy loans with the intention of changing the model, or increasing loan origination.  Not a policy change.  It isn't enough.  It is more like a rounding error. 

Therefore, it is some odds-and-ends, probably some stuff they had to buy back for some reason.

Means nothing.  Bad journalism.

fliphusker

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Re: Lending Club Loan Demand
« Reply #6 on: June 10, 2016, 03:35:04 PM »
Did this get posted? LC is already using their cash for loans.
http://www.wsj.com/articles/new-lendingclub-mistake-shows-loan-demand-issues-persist-1465565247
The new filing showed that LendingClub had bought $7.2 million worth of the notes itself in the period that was revised in May, the first time that LendingClub has held on to loans rather than immediately selling them to investors.
B
Nonsense.  Doesn't mean what you and the author of that article think it means.

LC did $2.5 Billion in loan originations last quarter.  $7.2 Million is so tiny relative to the origination rate that it simply could not be a new program to buy loans with the intention of changing the model, or increasing loan origination.  Not a policy change.  It isn't enough.  It is more like a rounding error. 

Therefore, it is some odds-and-ends, probably some stuff they had to buy back for some reason.

Means nothing.  Bad journalism.
Fred is correct.
Too many people want to see what they want to see and get suckered into these poorly written articles with no substance.  Fred is right, we are seeing more and more of this poor bias journalism pedaling their views to readers who lap it up as scripture. 
Come on people, take your heart out of these equations, that does you absolutely zero good. 

mchu168

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Re: Lending Club Loan Demand
« Reply #7 on: June 10, 2016, 04:51:42 PM »
I will chime in that it's a bad idea for LC to buy and hold notes.  If they're holding notes for 30 days or whatever as inventory so that they can sell a bundle of notes to an investor, then maybe that's ok. 

Like I said before, with LC's cost of capital probably in the teens or higher, they have no business whatsoever investing their cash in notes that earn 7-8%.  Period, end of story. 

jz451

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Re: Lending Club Loan Demand
« Reply #8 on: June 10, 2016, 06:52:49 PM »
Do they even have a true cost of capital? Their stock has been down since the IPO so there is no empirical  way to determine the cost of capital.

I will chime in that it's a bad idea for LC to buy and hold notes.  If they're holding notes for 30 days or whatever as inventory so that they can sell a bundle of notes to an investor, then maybe that's ok. 

Like I said before, with LC's cost of capital probably in the teens or higher, they have no business whatsoever investing their cash in notes that earn 7-8%.  Period, end of story.

rubicon

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Re: Lending Club Loan Demand
« Reply #9 on: June 10, 2016, 09:08:58 PM »
don't the notes beat the return on cash on the balance sheet?

the reason why they have so much cash is that investors at the IPO overpaid.

RT45

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Re: Lending Club Loan Demand
« Reply #10 on: June 10, 2016, 10:40:34 PM »
Quote
the reason why they have so much cash is that investors at the IPO overpaid.

Is there any way to know how much of current cash is from IPO vs. revenues?

bobeubanks

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Re: Lending Club Loan Demand
« Reply #11 on: June 11, 2016, 12:04:53 AM »
Quote
the reason why they have so much cash is that investors at the IPO overpaid.

Is there any way to know how much of current cash is from IPO vs. revenues?

Net income in the last quarter was $4.1M

rubicon

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Re: Lending Club Loan Demand
« Reply #12 on: June 11, 2016, 12:24:09 AM »
Quote
the reason why they have so much cash is that investors at the IPO overpaid.

Is there any way to know how much of current cash is from IPO vs. revenues?

most of it

http://www.bloomberg.com/news/articles/2014-12-10/lendingclub-poised-for-cash-infusion-of-its-own-to-fund-growth

Fred

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Re: Lending Club Loan Demand
« Reply #13 on: June 11, 2016, 01:50:58 AM »
http://www.wsj.com/articles/new-lendingclub-mistake-shows-loan-demand-issues-persist-1465565247

Of all the statements in that article, I found this to be the most relevant and most troubling:

Quote
Analysts at Morgan Stanley, who highlighted the volume spike as a positive development in a note last week, said in a note late Wednesday that the revision “underscores the potential risk for further internal control and reporting issues.”

Fred93

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Re: Lending Club Loan Demand
« Reply #14 on: June 11, 2016, 02:07:16 AM »
I don't understand the article.
Quote
But late Wednesday in a regulatory filing, LendingClub revised lower the listing of loans sold to investors, which it attributed to a mistake. It revealed that the previously stated jump to $65 million in the last week of May from $22 million the week before was actually a drop to $21 million.

What "regulatory filing" are they talking about?  How do I find it online?  Is this an SEC filing, or something else?  I don't know of any filings that tell about weekly "loans sold to investors".  (Loans are sold to banks, but notes are sold to most investors.)  Perhaps they mean "loans offered to investors thru notes and certificates"?  The SEC form 424 do  that daily.  They are just lists of loans.  Is somebody adding up those numbers?  Or are they talking about something that is filed with someone other than the SEC?