Greetings,
Minutes from the January Fed meeting released this week showed uncertainty over whether the Fed will raise rates at all in 2019. The Committee was also in favor of ending the reduction in assets on the Fed’s balance sheet. Global growth is slowing, and US inflation remains in line with the Fed’s target. A synchronized slowdown in global growth, driven by lower growth in the Eurozone and in China, presents downside risks in the short-term.
In regulatory news, Square’s ILC charter application has received opposition from 37 community groups. The groups are concerned about Square’s CRA activities and have asked the FDIC to bolster Square’s CRA requirements. Before this letter from community advocates, nearly all of the 15 letters the FDIC received were in favor of Square’s bid. Square is the furthest along the path to getting an ILC charter and its experience will determine whether other FinTechs follow its lead.
Technology companies continue their strides into the financial sector. Apple’s and Goldman’s planned co-branded credit card will launch later this spring. Apple will also develop tools in its Wallet app that will help borrowers track their financial health. The card is part of Goldman’s foray into mass-market consumer banking.
Structured Credit Investor magazine explores the challenges facing the maturing marketplace lending sector. Issuers need to distinguish between the borrower experience that they provide and manage liquidity. The article also makes the point that the sector is ripe for consolidation, although we haven’t seen any M&A yet.
In this week’s newsletter, we will look at MPL securitizations that have priced in 2019.
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2019 Securitization Update
The first two months of 2019 saw 5 securitization deals totaling $1.7 Bn in new issuance. The issuance volume represents a 23% drop over that seen in the first two months of 2018, as the market recovers from the volatility in equity and credit markets seen at the end of 2018. Total securitization issuance now stands at $46.2 Bn, with 147 deals issued to date.
Source: Bloomberg, PeerIQ
Since September 2013, 96 Consumer, 41 Student, 10 SME, and 1 Mortgage deals have been issued. The total issuance in the Consumer space is $26.5 Bn, in the Student space is $17.2 Bn, and in the SME space is $2.5 Bn.
Source: Bloomberg, PeerIQ
The following 5 deals have been issued in 2019:
- SoFi: SCLP 2019-1, SOFI 2019-A
- Marlette: MFT 2019-1
- Upgrade: UPGR 2019-1
- Prosper: PMIT 2019-1
Deals issued in 2019 have priced wider than the corresponding previous deals due to market volatility. SOFI 2019-A, the only student loan deal to price in 2019, saw its senior trances price between 16 and 35 bps wider, and its junior tranche priced 25 bps wider as compared to SOFI 2018-D. Consumer deals priced wider on average by 3 bps on the As and 25 bps on the Ds as compared to the corresponding previous deals.
Industry Update:
- Fed Minutes Show Officials Unsure on Need for Rate Hikes in 2019 (Bloomberg, 2/20/19) Minutes from the January Fed meeting released this week showed uncertainty over whether the Fed will raise rates at all in 2019.
- Global Slowdown Leaves Growth Weakest Since Financial Crisis (Bloomberg, 2/18/19) A synchronized slowdown in global growth, driven by lower growth in the Eurozone and in China, presents downside risks in the short-term.
- Community activists oppose Square’s ILC bid (American Banker, 2/20/19) Square’s ILC charter application has received opposition from 37 community groups who are concerned about Square’s CRA activities.
- Apple, Goldman Sachs Team Up on Credit Card Paired With iPhone (WSJ, 2/21/19) Apple will also develop tools in its Wallet app that will help borrowers track their financial health.
- As BB&T-SunTrust shows, banks must grow, change or die (American Banker, 2/21/19) Banks need to achieve scale and either develop technology or partner with technology organizations to compete effectively.
- FinTechs Continue to Drive Personal Loan Growth (SeekingAlpha, 2/21/19) TransUnion’s Industry Insights report shows that personal loan balances grew by $21 Bn to $138 Bn in Q4 driven by FinTech issuers.
- Citigroup Joins Goldman Sachs, Kleiner Perkins, American Express with Series C Investment in Home Finance Startup Better.com (BusinessWire, 2/21/19) Citigroup has joined AmEx and Kleiner Perkins in a $75 Mn Series C round for Better Mortgage, a digital mortgage lender.
- LendKey Reaches $2.6 Billion Loan Milestone, Expands its Partner Network with America First Credit Union (PRNewsWire, 2/06/19) LendKey announced that it has originated $2.6 Bn in loans for credit unions to date.
Lighter Fare:
- Japan’s Hayabusa 2 spacecraft is about to fire bullets into an asteroid (MIT Tech Review, 2/19/19) Japan’s Hayabusa 2 spacecraft will fire bullets into an asteroid to collect dust samples.