LendingClub, the country’s top provider of personal loans, said in earnings results Wednesday (Nov. 4) that demand for borrowing snapped back 80 percent in the third quarter, while the performance of its pre-pandemic portfolio continued to be resilient.
The San Francisco-based loan marketplace operator also said it’s well-positioned to navigate the current environment and complete the acquisition next year of Radius Bancorp, which LendingClub management called its “top strategic priority.”
“Clearly, conditions to date have been better than feared after the initial onset of COVID,” LendingClub CEO Scott Sanborn said during the company’s earnings call. “GDP is rebounding, initial unemployment claims are dropping, and consumer spending is recovering in many categories.”
However, Sanborn also acknowledged that there are still areas of concern given that U.S. unemployment claims remain well above pre-pandemic levels, the virus continues to grip the country, and the odds of additional government stimulus remain unclear.
“We are managing our business for success over the long run, and we are remaining prudently conservative in the short term,” he said. “We are not sitting still and hoping for things to get better.”
Sanborn said the fact that U.S. consumers came into this recession with strong balance sheets has been a positive for LendingClub. So has the fact that Americans have been “behaving prudently,” with increased savings rates and a focus on paying down their debts
Radius Acquisition
When LendingClub announced the $185 million Radius acquisition in February, the company said it planned to complete the deal within 12 to 15 months, a timeframe it reiterated Wednesday.
Sanborn said the deal “will be a win for our members, loan investors and shareholders. After the acquisition, we will be a very different company. We will be the first public neobank and the only full spectrum FinTech marketplace bank in the U.S.”
All told, Sanborn said LendingClub is well positioned to benefit from an economic recovery but also prepared for a protracted downturn.
Q4 Forecast
LendingClub said it is gradually reopening marketing channels in Q4 as well as continuously testing and learning from the performance of its post-pandemic loans issued within the past eight months.
The company also said it expects to see continued strong demand for loans, forecasting a $250 million to $300 million increase in Q4 originations. That would bring the total to $850 million to $900 million for the quarter.
Management said it is encouraged by the fact that today’s household balance sheets compare favorably to the 2008 recession year. Additionally, executives noted that two-thirds of federal stimulus checks have been used prudently to either pay down debt or save, while credit card spending and high-cost revolving credit have both declined year over year.
But from a macroeconomic standpoint, LendingClub said that while borrowers remain resilient, the pandemic continues to have a negative impact on the economy. The company added that it wouldn’t ask its employees to stop working from home and return to their offices until at least summer 2021.
All in, LendingClub reported a Q3 net loss of $34.3 million, far worse than the $400,000 it lost a year earlier. However, that was better than the $78.5 million in red ink the company recorded for Q2 during the pandemic’s initial wave.
Similarly, net revenues totaled $74.7 million for the latest period, down 64 percent from a year ago, but up 70 percent from Q2.