What a week! Three major M&A deals that are re-shaping the consumer finance and FinTech sector.
PeerIQ will be attending SFIG Vegas this Sunday through Wednesday. Drop us a note – we’d love to catch up and introduce you to our recent sales hire, Elena Korneeva.
|Morgan Stanley Buys E-Trade for $13 Bn|| Press Release
The Real Deal
|Lending Club & Radius Bank|| Press Release
|Ally Buys Card Works for $2.65 Bn|| Press Release
Deep Dive into The Lending Club & Radis Deal
LendIt Co-Founder, Jason Jones, put it well (paraphrasing): LendingClub wanted to disrupt banking, become a bank, and has now bought a bank. It’s a smart move enabling LC to bypass the charter process.
What do we know?
- Radius Bank is a Massachusetts chartered digital bank
- Offerings: check deposit, bill pay, card management, and a personal financial management dashboard, as well as open APIs to offer “Banking-as-a-Service” (BaaS) functionality to leading FinTechs.
- FinTech Customers: Brex, Nerd Wallet, and others.
- Profile: Has $1.2 Bn in deposits, $1.4 Bn in assets, $126 MM in bank equity capital, and ROE of 5.4%.
- LendingClub must seek regulatory approval to modify Radius Bank charter to execute against its stated goals.
- Deal price of $185 MM and a price-to-book ratio of 1.7.
- Regulatory approval may take another 12 to 15 months.
What do we not know?
- How exactly will LendingClub update the Radius Bank charter to enjoy Federal preemption?
- Is LendingClub now in the “Banking-as-a-Service” business? This term was referenced in the press release, however, it’s hard to imagine LendingClub building a national consumer brand and also being a behind-the-scenes infrastructure provider.
- What happens to Radius Bank’s legacy business? Will they continue to serve FinTechs such as Brex, MaxMyInterest, NerdWallet, Aspiration, etc., that have no connection to LC’s core mission?
- Did LendingClub share its business plan with regulators and address Section 23A of the Federal Reserve Act (Lending to Affiliates)? Said another way, is there a clear path to LendingClub using the deposits of Radius Bank to fund LendingClub loans?
- What are the initial new products that we should expect from LendingClub? (LendingClub plans to launch a bank savings account later this year.)
Chart of the Week – FinTech and Bank Mergers on the Rise
Source: American Banker, PeerIQ, The Companies.
FinTech Financings are Heating up
FT Partners published the 2019 FinTech Almanac – a nice slide deck summarizing deal activity. Here are the highlights:
- 2019 was the most active year ever for FinTech Financing, M&A, and IPOs
- In 2019, there were over 100 financing rounds of $100 million or more, which is the most ever by a significant margin.
- The two hottest areas of FinTech financing activity during the year were Challenger Banks and Real Estate Tech.
- 35 Challenger Banks each raised $20 million+ in financing in 2019 across 14 countries (see more on Challenger Banks in FT Partners’ recently published in-depth report).
- Five of the six largest FinTech M&A transactions ever happened in 2019.
BlackRock Continues to Embrace Alternatives
- YieldStreet announced a partnership with the world’s biggest asset manager, BlackRock.
- The partnership is specifically with BlackRock’s Global Fixed Income Group. In the past, YieldStreet investors had to invest in individual deals, spanning unique assets from shipping containers to litigation finance.
- YieldStreet has now created the YieldStreet Prism Fund, a closed-end fund which includes YieldStreet investments alongside corporate and sovereign debt managed by BlackRock.
- According to the landing page, the fund targets a 7% distribution rate (dividends paid quarterly) and requires a $20,000 minimum investment. There is an option for limited liquidity within approximately 15 months and management fees are set at 1.5%.
PeerIQ New Hire!
Elena Korneeva. Elena is a PeerIQ sales executive and is responsible for developing business opportunities. Elena brings her extensive experience in data analytics, business development, structured products banking, and portfolio structuring and management. Elena previously worked at Trepp and Credit Suisse. In her free time, Elena likes to snowboard and ride a bike.
- Morgan Stanley Is Buying E*Trade, Betting on Smaller Customers (WSJ, 02/20/2020) Morgan Stanley to acquire E*Trade for $13 billion.
- LendingClub Buys Radius Bank for $185 Million in First FinTech Takeover of a Regulated US Bank (CNBC, 02/18/2020) LendingClub acquires Radius Bank and is the first FinTech company to acquire a bank.
- How Millennials Could Make the Fed’s Job Harder (New York Times, 02/17/2020) Millennials retiring early could leave the Fed with less room to cut interest rates.
- Why the Fed is Taking an Incremental Approach to Faster Payments (American Banker, 02/13/2020) The Fed will release FedNow in incremental stages, with an initial offering coming in 2023 and 2024.
- FT Partners 2019 FinTech Almanac (FT Partners, 02/01/2020) Slide deck from FT Partners 2019 FinTech Almanac.
- Core Banking Technologies Are Changing. Here’s What That Means For You. (Forbes, 02/12/2020) Financial institutions are considering modernizing their core banking technologies.
- The Humbling of Goldman Sachs (Financial Times, 02/19/2020) Fears that nothing would change after the financial crisis turned out to be untrue.
- YieldStreet Creates New Fund with BlackRock as Sub-Adviser (Lend Academy, 02/18/2020) YieldStreet partners with BlackRock to roll out YieldStreet Prism Fund.
- LendingClub Continues Quest to Reimagine Banking with Radius Bank Acquisition (Lend Academy, 02/19/2020) LendingClub CEO, Scott Sanborn, said that the acquisition of Radius Bank is a “marriage of two digital innovators.”
- LendingClub Deal Could Spur More FinTech-Bank Mergers (American Banker, 02/20/2020) LendingClub’s deal with Radius Bank might influence more fintechs to scout for other banks to buy.
- CardWorks Announces Acquisition by Ally Financial. (PR Newswire, 02/18/2020) Ally Financial acquires CardWorks in a transaction valued in excess of $2.65 billion.
- Scientists Find a Wild Salamander That Hasn’t Moved from its Spot For 7 Years (Science Alert, 02/20/2020) Like the guy with the red stapler in the cult-hit “The Office,” scientists have discovered a Salamander that has remained in the same spot for 2,569 days.