The collapse of Silicon Valley Bank (SVB) roiled the U.S. financial system last month.
San Francisco-based LendingClub, a FinTech lender that became a direct-to-consumer (DTC) bank by acquiring a charter, was able to capitalize on that turmoil and capture nearly $1 billion in new customer deposits.
LendingClub’s CFO Drew LaBenne told investors on Wednesday’s (April 26) first quarter 2023 earnings call that the firm saw total deposits increase by nearly 13%, or $826 million.
At the end of the last fiscal quarter, LendingClub’s customer deposits stood at around $6.3 billion, and by the close of the most recent fiscal quarter on March 31, 2023, they had risen to more than $7.2 billion.
“We delivered a solid quarter driven by our strategic advantages,” said LendingClub CEO Scott Sanborn.
“While we expect continued industry and macro headwinds, these significant advantages, along with our growing online consumer deposit franchise and high-yielding short duration assets, provide us with a range of options to navigate the current macro environment while we build toward an ambitious future for the company and our growing membership base,” he added.
As PYMNTS reported, LendingClub, along with Capital One and Discover, began offering signing bonuses for customers who started new accounts or regularly deposited funds after the collapses of and Silicon Valley Bank and Signature Bank led customers to pull $119 billion from smaller banks.
Overall, the online lending platform reported better-than-expected earnings and revenue, despite a weaker than anticipated loan origination outlook. The firm’s loan business has been continually on the decline since the second fiscal quarter of 2022.
As a result of the Federal Reserve’s interest rate hikes, the cost of borrowing has increased and led to struggles among some FinTech platforms trying to keep pace with the rate hikes.
LendingClub executives repeatedly emphasized to investors listening in on the call that they expected macro market pressures to be ongoing, while underscoring the firm’s own resiliency and stable position.
“People are more uncertain about where the economy is going and there’s a general risk-off in the market,” Sanborn said, adding that “rates need to stabilize, alongside a little more clarity around where we are going in the economy.”
Still, the CEO highlighted that LendingClub’s total addressable market (TAM) and customer value proposition have never been greater given the ongoing digitization the contemporary landscape.
“As a branchless, digital bank, we are putting our dollars back into technology,” Sanborn said. “The environment remains challenging, but our team has navigated greater challenges and our foundation is strong with ample capital and liquidity.”
“We believe a recovery in the marketplace will be further out and expect further pressure — but we remain focused on profitability versus growth for the remainder of the year,” LaBenne said.
The ongoing growth in customer deposits will serve to help LendingClub fund the high-yielding loans on its balance sheet.
As PYMNTS reported, LendingClub last quarter cut 225 jobs as demand for loans fell due to rising interest rates.
“The payments industry must be more consumer-centric in the face of an uncertain economy,” LendingClub Financial Health Officer Anuj Nayar told PYMNTS at the start of the year.
Generally speaking, consumers who are already struggling to pay essential bills like food and housing have little energy or resources remaining to put toward short-term or long-term financial goals, let alone savings.
LendingClub’s earnings report showed that 40% of American households carry over $1 trillion of revolving debt, with an average credit card rate that has increased to over 20%.
The firm’s leadership underscored to investors on the call that because “borrows have less options right now,” LendingClub is attractively positioned to grow its share of market by providing easy, digital-first access to more affordable credit products.
More than 8 of every 10 existing LendingClub members (83%) say they want to do more business with the firm to support their financial situation, LaBenne said.
“We exist to help Americans keep more of what they earn by providing access to more affordable credit,” he added.
The company is also working on creating a more comprehensive mobile banking app to better serve its member base.
We’re always on the lookout for opportunities to partner with innovators and disruptors.
Learn More