Bloomberg by Matt Scully and Lily Katz (October 17, 2016)

LendingClub down 6.9% after falling as much as 9.9%, the most intraday since Aug. 9; co. said late Friday it’s raising interest rates and tightening credit standards amid higher delinquencies.

PEERIQ (CEO Ram Ahluwalia)

  • Recent loan deterioration likely to have “significant” negative valuation impact on loans, funds and ABS, Ahluwalia writes in e-mail
  • Lack of “consistent valuation framework” makes it impossible to compare returns across managers; says there are half a-dozen different valuation methodologies in P2P lending
  • Poor valuation methods, may expose some hedge funds to legal risk and investor fairness concerns
  • Investors of E, F, G-grade loans to see 120bps-475bps underperformance, PeerIQ wrote in Sunday newsletter

COMPASS POINT (Michael Tarkan)

  • New color from LC relates to borrowers who have recently taken out multiple installment loans, suggesting the “dynamic of ’stacking’” in portfolio/industry may be rising, Tarkan writes in note
  • Highlights significant deterioration in lower-tier credits amid macro environment showing no broad signs of economic stress; actions may limit borrower demand and investors may lose confidence in underwriting/loan product
  • Reminds investors that actions only impact standard loan program (75% of 1H16 originations), as LC doesn’t disclose details from custom program
  • Reiterates sell rating, $3 PT

FBR (Bob Ramsey)

  • Further credit deterioration is concerning, rate increase may be “negative indicator” for loan volume; while credit issues are concentrated in lower-tier grades, it’s troubling that softness seems to be “creeping into the D and E grade loans”
  • Notes that pricing on A grade loans dropped by 9 bps in latest update, which may indicate investor “flight to quality” and co. “using pricing as a tool to balance supply and demand”
  • Tracking changes in expected losses/returns is “a bit tricky,” as LC doesn’t consistently report same data; June price changes were shown in 3-yr and 5-yr loans, but not cumulative, as presented Friday
  • Move to enhance servicing may result in higher expenses
  • Reiterates market perform rating, $6.50 PT


  • LC down 54% YTD vs Russell 2000 Financial Services Index
    (RGUSFS) up 7.7%
  • LC has 3 buys, 15 holds, 4 sells, avg. PT $5.83: Bloomberg data


  • Earlier, LendingClub Slumps as Credit Deterioration Forces Higher Rates
  • Oct. 13, Goldman’s Marcus ‘Outflanks’ Banks, Fintech Cos.: Evercore ISI
  • Oct. 10, LendingClub Higher-Tier Loans Prepayments Pick Up: Compass Pt
  • LendingClub Falls 2.2% Post-Mkt; New Underperform at Wedbush
  • Oct. 5, LendingClub Probe Said to Review Buyback as Laplanche Faced Loss
  • Sept. 28, LendingClub’s Top Investors Are Buying Loans Again: BTIG
  • LendingClub Acted Severely, Swiftly, Unlike Wells Fargo: Lawsky
  • Sept. 26, LendingClub Fund Has First Negative Month on Valuation Fix

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To contact the reporters on this story: Matt Scully in New York at; Lily Katz in New York at
To contact the editors responsible for this story: Arie Shapira at