The US economy grew at a blistering 4.1% pace, the highest GDP growth reading since 2014, driven by consumer spending. Consumer spending grew by 4%, higher than economists’ estimates. Consumer spending has been driving US economic growth and outstanding consumer debt has reached all-time highs, although consumer debt per capita is still well below its pre-crisis peak.

Bank-Fintech partnerships continue as smaller banks and credit unions are also teaming up with fintech companies. In the latest example of such a partnership, community banks Blue Ridge Bank and Pioneer Bank are using Promontory Interfinancial Network to buy loans originated by SoFi. Such arrangements allow smaller banks to marry cheap sticky deposits with online lending. Please refer to our past webinar where we look at bank-fintech partnerships in greater detail.

Kroll has rated SoFi’s $546 Mn consumer loan deal SCLP 2018-3 AA+ on the senior tranches, A on the mezzanine tranche and BBB on the junior tranche. The $600 Mn pool has an average loan balance of $32k, a weighted average credit score of 749, and a weighted average remaining term of 60 months. The senior credit enhancement is 31.5%.

In regulatory news, the FHFA is suspending an initiative to update credit scoring models used by the GSEs as it views the efforts to be “duplicative” and “inconsistent”. The news is unfortunate as innovations to integrate alternative data (such as rent, utility payments, and alternate bureau scores) could expand access to credit to 7.6 Mn Americans who currently lack a credit score.

In this newsletter, we summarize earnings of the top 3 credit bureaus, and look at the 2nd quarter earnings of Discover, Synchrony and Enova. We conclude with a deep-dive into the changing regulation around valuation of whole-loans and the top 5 questions to ask to know if your valuation makes sense.


Credit Bureau Earnings

PeerIQ’s partner TransUnion released its 2Q earnings this week, along with Equifax. TransUnion’s earnings beat market expectations with revenue of $563 Mn, up by 19% YoY. TU’s revenue growth was driven by Online Data Services, where revenue grew by 23% YoY.

TU’s focus on the Fintech sector and technological innovation propelled organic growth. Reach out to learn more about TransUnion’s and PeerIQ’s enterprise analytics products, and upcoming products.

TransUnion also remains active in the M&A space and the company has completed 16 acquisitions since 2013:

Source: TransUnion, PeerIQ

Equifax’s revenue increased by 2% YoY to $877 Mn in 2Q, while net income decreased by 12% YoY to $145 Mn. Below we compare the latest earnings of the 3 credit bureaus – TransUnion, Equifax and Experian. Note that Experian’s earnings are for the 6 months ending 3/31/18.

Source: Bloomberg, PeerIQ

Equifax recently hired a CTO and appears to be re-platforming infrastructure on a cloud-first strategy.


Mixed Card Issuer and Fintech Earnings

Discover, Synchrony and Enova reported earnings this week. We summarize them below:

Revenue at Discover grew by 8% YoY to $2.6 Bn and net income grew by 23% YoY to $669 Mn.

Synchrony’s revenues grew by 3.9% YoY to $3.1 Bn and net income grew by 40% YoY to $696 Mn.

Enova’s revenues grew by 33% YoY to $253 Mn and net income grew by 50% YoY to $18 Mn.

  • Loans grew by 33% to $416 Mn driven by 39% YoY growth in the near-prime portfolio.
  • Provision for loan losses increased from 12.7% to 13.8% YoY.
  • Net charge-off rate increased from 12.2% to 12.9% YoY.

We will track all bank, credit card issuer and fintech earnings in our Lending Earnings Insights Tracker. The previous tracker can be found here. Stay tuned this week for our Q2 Securitization Tracker where we review issuance pricing, volume and credit enhancement trends.




Industry Update:

Lighter Fare:

  • One Woman’s Math Could Help NASA Put People on Mars (Bloomberg BusinessWeek, 7/25/18) Research around Lagrange points which balance centrifugal and gravitational forces, could allow NASA to build a waystation 45,000 miles away from the moon for future journeys to Mars.