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Coronavirus Roils Confidence; How Will Consumer Credit Hold Up?; LC+Radius

By Tito Donis

March 8, 2020

Greetings, Coronavirus news overshadowed a hot jobs report of ~270K new jobs and a downtick in unemployment rate to 3.5%.  The Fed cut rates to a 1-to-1.25% target range in an unscheduled FOMC meeting. Fed futures are expecting another rate cut at the next scheduled meeting in two weeks. Doubleline’s Gundlach expects the Fed to ultimately drop rates to zero.  Markets do not know the scale and scope of COVID-19’s impact. Markets are also skeptical that a rate cut can stop consumers from hunkering down and some question the logic: U.S. Consumers are Shifting to a “Hunker Down” Bunker Mentality Visa reported that credit card spending dropped and has not yet hit the bottom (although still expects high single-digit revenue growth this quarter). In some markets, consumers have started panic-buying at Costco, Target, and Walmart.  Anecdotally, an airline executive remarked that the drop in travel resembles the post-9/11 spending plunge. Informal polling from downtown NYC, which is far from being designated as a “cluster,” indicates that restaurant sales are down about 50%.  This week, we summarize the key risk factors. (PeerIQ Analytics customers should reach out to their client coverage lead to see what the risks may mean for their portfolios by geography and asset class). What Type of Credit Risk Should PeerIQ Customers Focus On? What about U.S. Consumer Loans? American Express has an investor day on March 17th -- we should learn more about impacts to credit and payments then. (So far, Amex is downplaying the effects of COVID-19.) Latest on Lending Club & Radius Bank American Banker’s Jim Dobbs has further analysis on LendingClub’s announced acquisition of Radius Bank. Some excerpts: In industry news, the WSJ’s Telis Demos reports that Square Keeps Rolling Along. Some excerpts: In financing news, we note this is the first week in several without an announced M&A transaction.  Lendio closed a $55M Series E funding round led by Mercato Partners. Lendio, led by CEO, Brock Blake, announced that it has secured $55 million in capital, including $31 million in equity led by Mercato Partners’ Traverse Fund, and a $24 million debt facility from Signature Bank. Lendio is the largest small business loan marketplace in the U.S. Small business owners utilize Lendio's free online service to find financing by browsing multiple loan products from a network of more than 75 lenders. Lendio will use the proceeds to grow their existing platform. PeerIQ Conferences: PeerIQ will be at LendIt Fintech USA 2020 - with a lot of hand sanitizer. PeerIQ CEO, Ram Ahluwalia, will be speaking on May 13th at 3:15 p.m. Reach out if you’d like to connect! Industry News:  Lighter Fare: