Retail sales increased 0.3% MoM in April as consumers benefited from wage growth and higher disposable income due to the tax overhaul. Consumer spending and access to credit continues to drive GDP growth and the report should allay investor concerns around US GDP growth.

In related news, banks are reporting lower RoA on credit card assets as loss rates rise and rewards costs increase. Higher interest rates and growing competition in the credit card space are crimping growth in card revenues while losses are rising due to a return to credit normalization. Average net-charge-off rates at large banks rose to 3.46% in 1Q2018.


Source: WSJ

In earnings news, Prosper reported flat revenue growth YoY at $30.5 Mn in 1Q2018. Net loss dropped to $11.4 Mn while originations increased by 27% YoY to $744 Mn. Prosper also completed its largest securitization of $650 Mn PMIT 2018-1, and now has an ABS funding base of $2 Bn and $100 Mn in warehouse lines. Look out for our Lending Earnings Insight tracker coming soon that discusses banks’, fintechs’ and credit card issuers’ earnings. The previous Lending Earnings Insight tracker is available here.

Anthony Noto’s first shareholder letter as the CEO of SoFi laid out his vision for growth of the company and its mission. Noto made the following notable points:

  1. SoFi originated $3.6Bn in loans in 1Q2018, a 27% YoY increase. SoFi now has 59,000 members.
  2. The SoFi at Work program which partners with companies to help their employees refinance student debt expanded its loan volume by 118% YoY. SoFi at Work is a major growth initiative for the company, and SoFi added 30 partner organizations to the program in 1Q2018.
  3. SoFi is expanding into the wealth management space and its asset base increased by 31% YoY. SoFi is looking to offer comprehensive investment advice beyond robo-advisors.
  4. SoFi is looking to balance “growth vs profitability” as its customer acquisition costs are nearly twice those of other online lenders, although SoFi’s customer profile tends towards more prime borrowers with larger loan balances.
  5. SoFi established a set of 11 values like “embrace diversity” and “take care of other people and help them grow.”

Nat Hoopes, Executive Director of the Marketplace Lending Association, announced the addition of 9 new members like Social Finance (SoFi), LendingPoint, College Ave, Laurel Road, Education Loan Finance (ELFI), Arcadia Funds, Victory Park Capital, PricewaterhouseCoopers, and First Associates to the MLA. This brings the total number of members to 24 and enables the MLA to expand its efforts to engage with state and federal policymakers in the marketplace lending space.

In fintech financing news, Vikram Pandit, ex-CEO of Citigroup and an investor in PeerIQ, has invested $100 Mn in FairSquare Financial, a startup that issues credit cards to underbanked individuals with credit scores between 600-700. FairSquare is led by CEO Rob Habgood and has extended $400 Mn in credit so far. In other news, Fundation, a digital small business lender, has secured a $120 Mn credit facility from SunTrust and Waterfall Asset Management to extend credit to small businesses. Guggenheim has extended a $600 Mn credit facility to LendingPoint, a near-prime consumer credit and POS lender, to expand lending operations.

KBRA has rated the tranches on Marlette’s latest $310 Mn deal AA, A and BBB-, and on Avant’s latest $222 Mn deal A-, BBB- and BB-. Below we compare these two new issue deals.

Deal Deep Dive MFT 2018-2 vs AVNT 2018-A 

This week we compare 2 very different MPL personal loan securitizations – Marlette’s MFT 2018-2 Prime deal and Avant’s AVNT 2018-A Near Prime deal. Both deals have different collateral characteristics and loss expectations, and cater to different investor bases. Although, the subordination levels on the A classes are similar, the higher loss expectations on AVNT lead to a rating one notch lower than that on MFT 2018-2 A despite significantly higher excess spread.

Collateral Comparison 

AVNT 2018-A has lower average loan size by $6,435, shorter weighted average loan terms by 9 months and higher WAC by 16.28%. This is a reflection of the quality of borrowers that Avant and Marlette target. Marlette’s prime borrowers have higher weighted average FICO scores by 59 points than Avant’s near prime borrowers. The geographic distribution is quite similar between the two deals.

Source: PeerIQ, KBRA

Bond Characteristics and Pricing

The significantly higher WAC on AVNT 2018-A leads to a 14.8% pickup in excess spread. KBRA’s base case loss estimate is 7.4% higher on AVNT 2018-A, which leads to a 7.4% higher loss-adjusted excess spread on AVNT 2018-A. This excess spread provides a meaningful cushion if losses exceed base case estimates.


Source: PeerIQ, KBRA 

Capital Structure

AVNT 2018-A has 3.3% lower O/C which is compensated by 14.8% higher excess spread. The A tranches have similar CE in both deals but Marlette’s A is rated one notch higher.

Source: PeerIQ, KBRA


AVNT 2018-A’s cumulative net loss trigger starts lower than that on MFT 2018-2 but picks up by month 7 and is ~10% higher after month 20. Given the back-loaded nature of losses on MPL consumer deals, AVNT 2018-A provides strong trigger protection.


Investors that seek to analyze these collateral pools further on the PeerIQ platform should reach out to learn more.

Industry Update:

Lighter Fare:

Subcutaneous Fitbits? These cows are modeling the tracking technology of the future (MIT Technology Review, 5/15/18) Researchers are testing next-generation fitness trackers which are embedded under the skin and can detect illnesses early on in cows, and will eventually be used in humans.