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“Neutral Rate” Continues to Drop; GS Opens Curtain on Marcus; RE FinTech Financings

By Tito Donis

January 10, 2020

Welcome back! 

In macro news, former Fed Chair, Ben Bernanke, is concerned that the “neutral rate” is continuing its multi-decade drop and shows no signs of slowing down. A drop in the neutral rate, which balances growth and slowdown risk, reduces the conventional ammo policymakers have to manage growth. 

The WSJ reports that Goldman Sachs intends to provide transparency to investors on the performance of lending operations, including Marcus. The move will bring financial reporting in line with competitors like JPMorgan and Bank of America. Also, stay tuned for GS Investor Day on Wednesday, January 29th. We’ll be sure to analyze all things lending related.

For the financial crisis history enthusiasts, we recommend the WSJ’s post-mortem on the JPM acquisition of Bear Stearns. Teaser excerpt: ”Jamie Dimon got a $30 stock for $10. It took 11 years to close the gap.” 

The theme of embedded banking continues to gain currency. Penny Crosman pens, “The Rise of the Invisible Bank” in American Banker. Highlights:

Check out our prior blog post on the topic of “functions as a service” here for more on the theme.

Auto and Credit Card Delinquencies Trending Higher

Our chart of the week is a sample of credit performance in the auto loan and credit market. The latest data shows a continued uptrend in the % of balances due for auto loans. Auto loans have under-performed due to falling resale value for used cars from supply glut and greater extension of auto loans (leaving the UPB below the auto’s equity value).

Credit performance remains below pre-crisis delinquency levels. We note that the attached does not control for vintage, credit risk, and other factors. Customers interested in having a granular breakdown of the performance of these asset classes can reach out to PeerIQ. Stay two steps ahead of the competition with timely market insights.

Source: PeerIQ, Deutsche Bank, Federal Reserve

In financing news, real estate FinTechs continue to make headlines. Orchard, a real estate startup led by CEO Court Cunningham,  raised $36 million in equity. Investors include Navitas, FirstMark, Juxtapose, and Accomplice. 

Roofstock, led by Gary Beasley, secured a $50 Million Series D. SVB Capital led the round with participation from Citi Ventures, Fort Ross Ventures, and 7 Global Capital.

HighRadius, led by CEO Sashi Narahari, raised $125 million in Series B funding led by ICONIQ Capital. HighRadius provides software for integrated receivables. 

Industry News:

Lighter Fare: