The Labor Department reports that that job openings have outnumbered job-seekers for the first time since record-keeping began in 2002. The US unemployment rate dropped to 3.8% in May, the lowest since Neil Armstrong first set on the moon in 1969. Market participants expect the Fed to continue the rate hike campaign amidst a tight labor market, wage growth, and signs of rising inflation and long-term interest rates.
PeerIQ CEO Ram Ahluwalia spoke with Julie Verhage and Shelly Hagan at Bloomberg about how we have definitively entered the late stage of the credit supply; a period characterized by increased competition and supply of credit, greater borrower demand, and a recovery in average debt-to-income levels. Accordingly, credit card companies are proactively readying for a turn in the credit cycle by increasing loss reserves.
PeerIQ’s 2Q2018 Lending Earnings Insights report delves into quarterly earnings at credit card issuers, banks and fintech lenders. You can download the report here. PeerIQ is hosting a webinar summarizing insights from the “Lending Earnings Insights 2Q2018” on Wednesday 6/13 at 3 p.m. EDT. We look forward to hosting you! Click here to register and to add the invitation to your calendar.
This week featured a wave of fintech financing news. Cross River Bank, led by former banker Gilles Gade, raised $27 Mn in senior unsecured notes. CRB will use the funds for marketplace lending, payments, strategic financing, business and commercial real estate lending. BlueVine, an online small business lending platform, secured $60 Mn in Series E funding to expand its lending program, in a round led by Menlo Ventures. Last month BlueVine also got a $200 Mn credit facility from Credit Suisse.
Sunlight Financial, which lends money to install and upgrade solar systems, raised $50 Mn in private equity from FTV Capital to expand its financing programs. LendStreet, an online consumer debt restructuring and consolidation platform, raised $7 Mn in Series A and $110 Mn in debt from Prudential Financial, to expand operations. MoloFinance, a UK-based startup that is designing digital mortgages, raised GBP 3.7 Mn in their latest seed round.
GS Marcus Update
Goldman Sachs’s President and co-COO David Solomon presented the company’s vision for Marcus at the Alliance Bernstein Strategic Decisions Conference. GS is investing heavily in Marcus for the long term and expects it to be “very big, very profitable”. Below are some of the highlights from the talk:
- Personal loans are just the start, with possible expansion opportunities for Marcus into mortgages, credit cards, auto loans and insurance. There are 4 key product areas – Borrow, Spend, Save, Protect with 12 separate products listed with a focus on Clarity Money. Since its launch Marcus has served ~1.5 Mn customers with $3+ Bn loans originated and $20+ Bn in online deposits.Source: Goldman Sachs
- GS views their lack of legacy banking software as a competitive advantage and has invested heavily in building their platform. GS has invested, through capital spending and operating losses, $600 Mn, including reserves, up by $100 Mn.
- GS is building Marcus as a business “for the next 50 years” but is expanding the personal loan program cautiously as the credit cycle may turn. GS wants to integrate the consumer platform with its wealth management business.
No question that Marcus – and the lending and wealth management initiatives more generally –will be a significant driver of ROE in several years time and the company is investing to make it a success. As we noted in a prior newsletter, banks that lack on online banking capability do not have a seat at the table and will likely close the gap Marcus is creating via M&A.
PeerIQ is hosting a webinar by CEO Ram Ahluwalia on “Lending Earnings Insights 2Q2018” on Wednesday 6/13 at 3 p.m. EDT. We look forward to hosting you! Click here to register and to add the invitation to your calendar.
We will bring to bear the full weight of our data & analytics resources to help market participants understand where we are in the credit cycle. Look forward to speaking with you then.
PeerIQ in the News:
- Credit Card Issuers Beef Up Reserves in Anticipation of Losses (Bloomberg, 6/7/18) PeerIQ CEO Ram Ahluwalia spoke with Julie Verhage and Shelly Hagan at Bloomberg on how credit card companies are preparing for a turn in the credit cycle by increasing loss reserves. Ram said, “These companies must see early indicators of deterioration in their models. They started doing this a couple of quarters ago.”
- American Job Openings Now Outnumber the Jobless (WSJ, 6/5/18) 6.7 Mn openings for 6.3 Mn job-seekers point to a tight labor market and inflationary pressures ahead.
- Bernanke Says U.S. Economy Faces a ‘Wile E. Coyote’ Moment in 2020 (Bloomberg, 6/7/18) Bernanke thinks that stimulus from the tax reform when the economy is close to full employment will boost GDP until 2020 and then slow down growth significantly after.
- CRB Group, Inc. Closes $27 Million Notes Offering for Cross River (PR NewsWire, 6/7/18) CRB group, the parent of Cross River, has raised $27 Mn in senior unsecured notes. CRB will use the funds for marketplace lending, payments, strategic financing, and business and commercial real estate lending.
- BlueVine Raises $60 Million in Series E Funding led by Menlo Ventures (CrowdFund Insider, 6/5/18) BlueVine, an online small business lending platform, secured $60 Mn in Series E funding to expand its lending program, in a round led by Menlo Ventures.
- Sunlight Financial Gets $50 Million From FTV to Make Solar Loans (Bloomberg, 6/6/18) Sunlight Financial, which lends money to install and upgrade solar systems, raised $50 Mn in private equity from FTV Capital to expand its financing programs.
- LendStreet raises $7 Mn (PE Hub Network, 6/7/18) LendStreet, an online consumer debt restructuring and consolidation platform, raised $7 Mn in Series A and $110 Mn in debt from Prudential Financial, to expand operations.
- London Fintech MoloFinance Secures £3.7 Million in Seed Funding for The Development of Fully Digital Mortgage Solution (CrowdFund Insider, 6/6/18) MoloFinance, a UK-based startup that is designing digital mortgages, raised GBP 3.7 Mn in their latest seed round.
- CLUB 2018-1 Pre-Sale report (KBRA, 6/7/18) KBRA has rated the senior tranche on LendingClub’s latest $294 Mn securitization A-.
- Goldman Sachs Expects Marcus to Get ‘Very Big, Very Profitable (Bloomberg, 5/31/18) David Solomon laid out Goldman’s vision for Marcus as a broad consumer platform for the long term.
- Industrial Banks: What Are They and How Do They Impact the Economy? (B2C, 5/29/18) In the absence of a regulatory swim lane, ILCs can help fintech and technology companies effectively compete in the financial services sector.
- British fintech startup Revolut to seek U.S. banking license: CEO (Reuters, 6/4/18) Revolut will launch banking services in the US with a partner and will also look to get a banking license.
- Fifth Third adds new fintech partner to enhance service for corporate clients (American Banker, 5/31/18) FifthThird is partnering with Global Transaction Banking to provide cash management and payment services to corporate clients.
- Funding Circle scraps downloadable loan book (P2P Finance News, 6/7/18) Funding Circle will stop providing daily loan performance data and will now make it available only quarterly.
- Podcast 153: Tom Burnside of LendingPoint (LendAcademy, 6/1/18) Tom Burnside of LendingPoint talks about the transition from small business to consumer lending, and loan performance among other things. The transcript is available here.
- What 20 Years of Jeff Bezos’s Shareholder Letters Can Teach You About Becoming a Top Performer (Inc, 5/30/18) A top performer means holding yourself and everyone around you to a higher standard and operating with a “Day 1” mindset.