Release Date: January 28, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- LendingClub Corp (LC, Financial) reported a 13% year-over-year increase in originations for the fourth quarter.
- The company achieved a 34% increase in pre-provision net revenue, indicating strong financial performance.
- LendingClub Corp (LC) successfully exited its new bank operating agreement, becoming one of the first fintech banks to do so.
- The company increased its deposit base by 24%, driven by the launch of the LevelUp Savings product.
- LendingClub Corp (LC) is working towards obtaining an investment-grade rating for its senior security, which could open up new investor opportunities.
Negative Points
- Provision for credit losses increased to $63 million, up from $42 million in the same quarter of the prior year.
- Net interest margin decreased slightly to 5.42%, which the company expects to be the low point for upcoming quarters.
- The company experienced a $4.4 million pre-tax impairment of internally developed software due to the Tally Technology purchase.
- Marketing expenses are expected to rise as LendingClub Corp (LC) plans to expand acquisition channels.
- The company faces challenges in reactivating dormant marketing channels, which could impact growth in the short term.
Q & A Highlights
Q: Can you explain why the first quarter volume guidance is flat compared to recent growth, and how interest rate changes might affect pricing and volume?
A: Scott Sanborn, CEO: Q4 and Q1 are typically challenging due to seasonal factors. We plan to maintain credit discipline and will reactivate marketing channels as we exit Q1. Drew LaBenne, CFO: We expect to raise sales prices even without further Fed rate cuts, depending on buyer mix and rate environment.
Q: What are the long-term volume and ROE expectations, and what will it take to reach mature run rates?
A: Scott Sanborn, CEO: Historically, we've reached $3-4 billion in quarterly issuance. We aim to return to and exceed those levels, even with tighter credit. Drew LaBenne, CFO: Our 2025 exit rate is a stepping stone for further improvement, not our final destination.
Q: Has there been any change in loan performance across different consumer cohorts?
A: Scott Sanborn, CEO: Performance is stable but elevated across the board. We see outperformance in the near-prime space, possibly due to our underwriting.
Q: How are you managing deposit costs, and what impact will the exit of a commercial deposit customer have?
A: Drew LaBenne, CFO: We exited a high-cost commercial deposit, which will benefit Q1. We effectively repriced deposits with an 80% beta to Fed rate changes. Scott Sanborn, CEO: Our LevelUp Savings product has been successful, bringing in $1.2 billion in deposits.
Q: What is the strategy for holding more loans on the balance sheet as loan sale pricing improves?
A: Drew LaBenne, CFO: We plan to retain similar amounts of loans on the balance sheet and replenish the held-for-sale portfolio. Scott Sanborn, CEO: Operating conditions have improved, and we aim to maintain inventory for large buyers.
Q: How does the competitive landscape look, and is there enough origination volume for everyone?
A: Scott Sanborn, CEO: The competitive landscape remains stable. We focus on efficiency and conversion rates in our channels, and borrower demand is strong.
Q: What are the secondary factors considered when allocating against different funding channels?
A: Scott Sanborn, CEO: We focus on delivering consistency and size, which is rewarded in terms of price and predictability. We aim to drive price increases within the static mix and evolve the mix deliberately.
Q: Is there potential for acquiring entities to grow the member base?
A: Scott Sanborn, CEO: We are open to acquisitions that enhance capabilities and accelerate our roadmap, as seen with the Tally acquisition. Drew LaBenne, CFO: We remain disciplined in using shareholder capital wisely.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
