LendingClub turmoil takes toll as losses widen

LendingClub reported its largest quarterly loss in a year as it struggles to bring banks back to its online lending platform following the departure of its chief executive and a scandal involving altered loan documents.

LendingClub, which matches borrowers and lenders via an online marketplace, reported a second-quarter loss of $81.4 million (€73.4 million), or 21 cents a share, compared with a loss of $4.1 million, or 1 cent a share, a year ago.

Resignation

The company also continued its executive shake-up, with the resignation of chief financial officer (CFO) Carrie Dolan. Her departure is the first high-profile exit since the departure of Renaud Laplanche, the company's founder, as chief executive on May 9th.

Dolan, who joined six years ago when LendingClub had just 40 employees, gave notice early this year, but the board of directed asked her to delay moving on, executives said on a call with investors. Accounting officer Bradley Coleman was named interim CFO. In addition, LendingClub appointed Timothy Mayopoulos, president and chief executive of Fannie Mae, to its board as an independent director.

Lending improprieties

The second-quarter earnings report follows a tumultuous period for LendingClub, once considered the standard bearer in a new generation of online lenders but which has been pummeled by revelations of lending improprieties, a US department of justice investigation, the departure of loan investors and layoffs of 179 employees.

“The good thing is [the second quarter] is now behind us,” said Scott Sanborn, who took over as president and CEO in June. “We have accomplished quite a bit since the events of May 9th.”

LendingClub’s shares were down more than 2 per cent at about $4.68 in after-hours trading. That puts the company’s market cap at about $1.8 billion, about a third its market value of about $5.4 billion when it went public in December 2014 in an offering priced at $15 a share.

Loan originations

LendingClub’s problems were highlighted by weak growth in the second quarter in loan originations, the company’s main revenue stream. Loan originations, or the number of new loans processed by the company, rose just 2.3 per cent to nearly $2 billion in the quarter, a steep drop from the 68 per cent growth in the preceding quarter and 90 per cent growth a year earlier.

The fall reflects the industry’s struggles with faltering investor appetite for loans, rising defaults and the threat of heightened regulation. For the third quarter, the company expects operating revenue of $95 million to $105 million, below analysts’ current average estimate of $106.1 million. In the second quarter LendingClub had revenue of $102.4 million. – (Reuters)