PeerIQ Weekly Update: November 6, 2016
By Vy Phan
November 6, 2016
- As noted in the Q3 Securitization Tracker, “partner funding banks will seek to align their economic interests with lending platforms” to reduce true lender risk.
- “On balance, we predict most banks to cooperate with marketplace lenders to marry their low-cost funding profile with low-cost operations” driven by attractive ROE in a negative real-rate world.
- “Marketplace lenders that apply bank-level compliance and control standards stand to benefit”.
- CRB’s ROE at 26.5% is higher than the ROE vs. FDIC insured institutions at 9.8%.
- CRB’s ROE increased substantially after increasing MPL activities from an ROE of 8.9% in Q2 ‘12 to 26.5% in Q2 ‘16.
- We show increased higher ROE is not a function of leverage. In fact, CRB Leverage is lower than peer group. Regulatory capital levels (not shown) indicate that CRB is well-capitalized.
- Cross River Bank has experienced a ~70% CAGR in Net Operating Income since 2012 around when CRB increased MPL origination activities.
- Total assets have grown from $10 Mm to nearly $500 Bn in assets since inception, while maintaining high levels of equity and asset quality.
- Maintaining an ROE of 20% over 10 years will generate a 6.2x increase in book value.
- 9-month revenue more than doubled to $55MM from $26 MM last year.
- Ram will guest lecture at Wharton Business School this Tuesday, 11/8 for professor Shimon Kogan's course,"Fintech: Business, Data, Analytics" at 5 pm in Huntsman Hall (JMHH F95).
- COO, Kevin Reed will speak on the "True Lender Implications for Marketplace Lending" panel discussion this Thursday, 11/10, hosted by Kaye Scholer and Lending Times.
- SEC’s Fintech Forum on November 14th in Washington, DC. PeerIQ CEO, Ram Ahluwalia, will speak on a panel titled “Recent Innovation in Capital Formation”.
- Bloomberg’s “Growing a FinTech Enterprise: Legal & Business Frameworks” Conference, Wednesday, November 16, in Washington, DC. Ram will join SoFi General Counsel, Rob Lavet, and Thomas Baxter from Sullivan & Cromwell to discuss how FinTech firms can position for growth and navigate regulatory challenges.
- IMN’s Investors’ Conference on Marketplace Lending, December 1st in New York. Ram will be speaking on the panel, entitled, “Assessing the Relative Value of Securitization as a Funding Tool,” and COO, Kevin Reed, will be speaking on a panel entitled, “Third Party Loan Valuation.”
- SEC Publishes Agenda for Fintech Forum on November 14th (SEC, 11/4/16)
- United States: Spotlight Remains On Marketplace Lenders Post-Madden (Davis & Gilbert LLP, 11/3/16) Marketplace lenders will need to adjust their business operations as the legal landscape evolves post-Madden.
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Venture Capitalists Get Radical and Invest in a...Bank (WSJ, 11/1/16) Several VCs including Battery Ventures, Ribbit Capital, and Andreesen Horowitz, announced a $28 MM investment in Cross River Bank (‘CRB’).
- SoFi and Fannie Mae Announce Cash-out Refi for Student Loans (Housingwire, 11/2/16) SoFi and Fannie Mae announced a new product that will allow homeowners to refinance their mortgage at a lower rate and pay down student loans balances.
- VPC Specialty Lending's Quarterly Letter (VPC, 11/16) VPC intends to shift towards balance-sheet investments as opposed to whole-loans.
- Fintech’s Struggling Lenders Want Your Help (WSJ, 11/2/16) RiverNorth is the latest investment manager to debit an online-loan fund open to the public, a good sign for online lenders seeking more permanent capital.
- Credit-Card Losses Near Low (AB Alert, 11/4/16) Charge-offs among securitized credit-card accounts were down 16 bps from the second quarter.
- OCC Moves to Support Fintech with New Office (GlobalCapital, 11/3/16) The OCC announced a new office dedicated to fintech innovation starting in Q1 ’17.
- OnDeck Loses Top Loan Salesman to Fintech Investor (WSJ, 11/4/16) Zhengyan Lu, a seasoned executive at OnDeck, has joined Victory Park Capital.
- CapOne Rolling Out Subprime-Card Bonds (AB Alert, 11/4/16) Capital One is planning to introduce bonds backed by subprime credit card accounts by mid-year 2017.
- Obama Is Making a Last Stab Push to Help Loosen Mortgage Lending (Bloomberg, 11/4/16) Low down payment programs and alternative credit scores are expected to increase borrower access to the mortgage market.
- New Voting Booths Lock Americans Inside For 45 Minutes So They Can Consider Decision Before Casting Ballot (The Onion, 10/28/16) A new form of "Reg-Tech" has been floated for the upcoming election.