PeerIQ Monthly Update: February 2016

By Vy Phan

February 29, 2016

Going into March and ABS Vegas, we see a thaw in credit markets with a step-up in issuance and trading activity. We thought we would summarize recent deal activity and share our observations on the market.

Year-over-year top-line growth remains substantial - ~4x year-over-year growth in Consumer ABS and ~8x growth in student lending ABS as measured by our Securitization Tracker

Spreads have widened largely driven by investor concerns of a global slowdown and credit performance

The effect is particularly pronounced for emerging ABS issuers in the unsecured consumer installment loan market

Emerging ABS issuers are competing for the same pool of dollars and bumping into each other on the calendar. Deals are getting done, albeit at higher financing costs

Recent ratings actions and increased delinquencies are increasing the appetite for trading and tools to separate macro concerns from underlying credit risk

Leading investors we interact with increasingly believe the table has largely been set for Marketplace Lenders that seek to fund via securitization

The view is that the proliferation of 300+ smaller US originators will simply not be able to generate meaningful issuance volume to attract investors and face a difficult road ahead

Larger marketplace lending platforms need to continue to invest in building their ABS brands and standardization to improve reliable access to the securitization markets going forward

At the deal level, we continue to see a proliferation in deal structures and variations:

Recent deals from Avant and Loan Depot for instance show meaningful differences in structure from prior deals

The CHAI shelf, which historically has consisted of Prosper loans, now welcomes Marette loans

Kroll is increasing its activity in the space and appears to be focusing on emerging issuers

Against the foregoing, the need for analytical tools to help institutional investors originate, compare, finance, price, and exchange the risk is as strong as it’s ever been. Several members of the PeerIQ management team will be at ABS Vegas this week. Please stop by the ‘Development of Securitization in Marketplace Lending’ or the ‘The Future of Regulation in US Marketplace Lending’ panel and say hello. 1. Conferences

ABS Vegas in Vegas (Feb 28-March 2)
- Development of Securitization in Marketplace Lending, Mon 1:45pm PST
- Future of Regulation in US Marketplace Lending, Mon 4:35pm PST

PeerIQ will be speaking at LendIt in San Francisco on April 11^th

2. Hiring Update: Brian Roncoroni!

We are very excited to introduce a new member to our team this month. Brian’s arrival has received recognition in media outlets including Asset Backed Alert, CreditFlux and SCI.

Brian Roncoroni joins PeerIQ to head up our sales efforts. Prior to this role, Brian was working at CoreLogic as a Strategic Account Executive. His structured products experience also includes time at both Sungard and FactSet. Brian previously held institutional sales positions with Salomon Brothers and Franklin Templeton.

3. Sector Update

LendingClub to Change Its Fee Model(WSJ, 2/26/16) Lending Club directs portion of fees to WebBank to ensure the economics of the originating bank are tied to loan performance

China Said to Agree $7.7 Billion of Bad Loan Securitization(Bloomberg 2/24/16) New securitization quota has potential to help the banks remove 100-150 billion Yuan of distressed loans from their balance sheets

More Subprime Borrowers Are Falling Behind on Their Auto Loans(Bloomberg, 2/23/16) Delinquencies on subprime auto loans packaged into bonds rose to 4.7 percent in January—a level not seen since 2010

Online lenders see cash crunch(CNBC, 2/19/16) Despite a tighter ABS market and other capital constraints, the P2P industry is still experiencing major growth that has attracted large investors over the last several years

SFIG Testimony regarding impact of Dodd-Frank Act and Basel III on Securitization Market(SFIG, 2/24/16) Testimony by SFIG’s director, Richard Johns, before congress on the impact of Basel II and Dodd-Frank on the ABS markets

Various media mentions of PeerIQ this past week

Ex–Citi Boss Vikram Pandit Backs Peer-to-Peer Lending(Institutional Investor, 2/24/16) PeerIQ receives Vikram Pandit’s backing and recognition as one of the key players within the alternative financial economy

US online lending credit is deteriorating, here’s the data(FT, 2/26/16) PeerIQ’s recent analysis on P2P credit performance

The online lending market might be telling us something troubling about the US economy(Business Insider, 2/22/16) Discussion of increased delinquencies in P2P data

Lending Club and Prosper Interest Rates, Loss Curves and Loan Performance(LendAcademy, 2/22/16) In light of recent news, LC and Prosper interest rate increases and vintage performance addressed

26 FinTech Companies Powering Institutional Investments and Trading(Letstalkpayments, 2/22/16) PeerIQ makes the list of 26 FinTech companies powering Institutional Investments and trading