The US economy registered a strong inflation print with core CPI rising 2.1% YoY in March. The inflation reading bolsters the Fed’s case for raising rates twice more in 2018.
With the first quarter earnings season underway, Citi, JPM and Wells Fargo reported earnings that either met or beat expectations, as financial market volatility boosted trading revenues. JPM posted all-time high profits as revenues increased across most businesses. JPMorgan said that it expects 2018 net interest income of $54 Bn – $55 Bn and average core loan growth of 6%-7%, and CEO Dimon said that “the environment is intensely competitive and lending was flat for the quarter”.
Wells Fargo’s earnings also beat analyst expectations, but the bank cautioned that these results could change due to the ongoing CFPB investigations. Consumer loans decreased $9.5 Bn QoQ – more than LendingClub or SoFi originate in a year – driven by a $3.8 Bn decline in auto loans, $1.9 Bn seasonal decline in credit card balances, and a $1.8 Bn decline in the junior lien mortgage portfolio.
LendIt 2018 Update
LendIt 2018 concluded recently in San Francisco and we take a look at some of the highlights of the conference.
Overall, the turnout this year of ~6,500 was below its peak, even as the conference has expanded to the crypto and blockchain sector.
Upgrade and LendingClub were the main sponsors. Upgrade made its presence felt with extensive banners and a large contingent in attendance. Upgrade is arguably the fastest-growing non-bank lender (Marcus had several years to build out its servicing before offering loans…) and the conference provided them with an opportunity to introduce themselves to the broader market.
LendIt Keynotes and Talks
LendingClub’s Scott Sanborn, Upgrade’s Renaud Laplanche, SoFi’s Anthony Noto and Affirm’s Max Levchin were some of the main keynote speakers. PeerIQ CEO Ram Ahluwalia delivered a standing-room only talk on “What is Happening with Personal Loan Losses”.
Bloomberg’s Emily Chang pressed Noto with tough questions and SoFi’s plans for the future. Noto remained disciplined, stayed on message, and shared the promise of SoFi’s brand. Noto artfully deflected the question when asked if viewed Marcus as competition. SoFi’s CEO and new CFO, structured finance veteran Michelle Gil (announcement here), are ex-GS alum – which makes the question somewhere between ironic and entertaining.
Sanborn focused on the deteriorating financial health of US consumer with rising debt levels, stagnant median wages, and a low personal savings rate. Sanborn emphasized the need for regulatory innovation (for instance, enabling lenders to use tax data to improve underwriting) to improve financial health. Sanborn also shared LendingClub’s new “direct pay” feature which increases the likelihood that personal loans are used to pay down higher rate credit card debt.
We have received strong follow-on PeerIQ CEO’s Ram Ahluwalia’s talk on “What is Happening with Personal Loan Losses”. We will be conducting a webinar on Wednesday April 25th at 2 pm ET. Mark your calendars, and stay tuned!
Below is an excerpt from the opening slide in talk:
LendIt News and Announcements
Below are some of the notable announcements from LendIt:
- SoFi Names Michelle Gill Chief Financial Officer – SoFi named ex-GS, ex-TPG Michelle Gill as CFO. SoFi could not have picked a better CFO should SoFi intend to go public, seek a banking carter, or enter new lending markets.
- Online Lender Upgrade Now Offers Personal Line of Credit – Renaud Laplanche’s new startup Upgrade is now offering unsecured personal lines of credit up to $50,000. A personal line of credit product represents true innovation. We’re speculating here, but another product – the home equity line of credit – would be a logical extension. That would put Upgrade in direct competition with Cagney’s new startup that is offering HELOCs.
- MoneyLion’s New Bank – MoneyLion, led by CEO Diwalker Choubey, won the “Top Emerging Tech” company award. MoneyLion has broadened its product offering from lending to now include investing, borrowing and checking accounts in a single, subscription-based membership. MoneyLion appears to be positioning itself to own the customer relationship by delivering on cash, asset, and liability management.
- Cross River Bank, led by Gilles Gade, won the “Most Innovative Bank” award for the 2nd year running. PeerIQ announced a partnership with Cross River Bank this past quarter, and we’re delighted to be a part of the story.
Heard at LendIt
- “A reckoning is coming. The US is ground zero. There is a $37 trillion dollar shortfall in the retirement sector. This is coming and we can’t just think we have 32 years to solve this problem.” – Scott Sanborn, CEO of LendingClub
- “If a mortgage can be done in 10 [days] a personal loan can be done in 1 [day]” – Jay Farner, CEO of Quicken Loans
- “We are going to shift out of physical form factor to a form that is on your phone. The software is going to eat the card.” – Max Levchin, CEO of Affirm
- “[We] focus on helping individual members achieving their financial independence … It is not about being rich it is about doing what you want.” – Anthony Noto, CEO of SoFi
- “We have had multiple iterations of our credit model. We can change it a lot faster than a traditional bank.” – Omer Ismail, CCO of Marcus
- “Consumer credit behavior is shifting rapidly due to innovation and a greater supply of credit. Operators that can monitor trends in real time have a competitive advantage.” – Ram Ahluwalia, CEO of PeerIQ
- “I think the notion of a Fintech charter makes sense. The attributes of a bank are arbitrary.” – Raj Date, MD Fenway Summer
PeerIQ’s Valuation Report
PeerIQ is pleased to share excerpts from PeerIQ’s newly redesigned Valuation Report below. The valuation report delivers accurate, transparent, and daily pricing:
- Overview of portfolio valuation including price, yield, and various risk measures like WAL, duration and interest rate sensitivity
- Portfolio valuation stratified by various loan characteristics like vintage, term, product type, coupon, and more.
- Price change decomposed into changes from interest rate movements, changes from credit spread movements and changes due to a change in loan status
- Loan-level detail including price, yield, risk measures, valuation curves and decomposed period price changes
- Graphs showing the distribution of WAL relative to market interest rate curves
The report also shows the interest rate sensitivity of your portfolio by mapping a portfolio’s WAL to the yield curve.
“What is Happening with Personal Loan Losses on Wednesday April 25th at 2 p.m. Details to follow, stay tuned!
- S. Core Inflation Gets Long-Awaited Bump as Phone Drag Fades (Bloomberg, 4/11/18) The US economy registered a strong inflation print with CPI (excl. food and energy) rising 2.1% YoY in March, keeping the Fed on track for raising rates.
- Citigroup Profits from Stock-Market Turmoil (Bloomberg, 4/13/18) Rising volatility is boosting trading revenues at large US banks.
- JPMorgan First-Quarter Revenue, Profit Rise to All-Time Highs (Bloomberg, 4/13/18) JPM posted all-time high profits as revenues increased across most businesses.
- Wells Fargo Shares Rise after Earnings Top Estimates (CNBC, 4/13/18) Wells Fargo earnings also beat analyst expectations, but the bank cautioned that these results could change due to the ongoing CFPB investigations.
- SoFi Names Michelle Gill Chief Financial Officer (PR NewsWire, 4/9/18) SoFi named ex-GS, ex-TPG Michelle Gill as CFO. This is an interesting announcement as SoFi branches out into providing a fuller suite of banking products and taking on Marcus head-on.
- Online Lender Upgrade Now Offers Personal Line of Credit (CrowdFund Insider, 4/10/18) Renaud Laplanche’s new startup Upgrade is now offering unsecured personal lines of credit up to $50,000 putting the company in direct competition with Cagney’s new startup that is offering HELOCs.
- MoneyLion’s New Bank (BusinessWire, 4/10/18) MoneyLion is expanding MoneyLion Plus to offer investing, borrowing and checking accounts in a single, subscription-based membership.
- OnDeck Announces Pricing of $225 Million Securitization (PR NewsWire, 4/10/18) OnDeck priced its latest $225 Mn deal with the A tranche rated AA by DBRS.
- Prosper to keep PMIT Shelf, but Seeks New Blood as Loan Agreement Winds Down (GlobalCapital, 4/10/18) Prosper will add new sellers to the PMIT platform once the current loan purchase agreement ends.
- Ex-LendingClub Chief’s New Venture Set to Issue ABS (GlobalCapital, 4/11/18) Upgrade will have its inaugural deal in the next few months as the company seeks to diversify its funding sources.
- PayPal Makes a Move Toward Traditional Banking (WSJ, 4/9/18) In continuing bank-fintech partnerships, PayPal will add basic banking features to its digital wallet.
- Ingo Powers Instant SMB Loan Payouts for Kabbage (PYMNTS, 4/9/18) Kabbage is working with Ingo to improve the customer experience by providing real-time disbursements of Small-Business Loans.
- Nelnet Expands Loan Servicing Offerings To Meet Demands Of Fintech Lenders (4/9/18) Nelnet is providing a white-label servicing platform for Fintech lenders. Servicing is a major investor concern and would appreciate the expertise a platform like Nelnet can bring.
- Santander launches the first blockchain-based international money transfer service across four countries (Santander, 4/12/18) In true financial innovation, Santander is using the blockchain to offer international money transfers.
- Citizen’s Hyper-Accurate Quartz Watch Is Ready for the Apocalypse (Bloomberg, 4/13/18) In a world full of smartwatches, Citizen’s analog light-powered watch is extremely accurate and near-indestructible.