Back Cross River Intelligence Archives

Unemployment Checks and Rolls; GDOT, LC and SQ Earnings; Rocket IPO

By Tito Donis

August 10, 2020


Heading into the dog days of summer, we cover (1) the latest news on unemployment rolls and the pare back of stimulus; (2) takeaways from Green Dot, LendingClub and Square earnings; and, (3) the latest from public markets (Rocket’s IPO, and Kabbage’s planning).

Let’s get to it.

On Friday, the U.S. government announced the July unemployment rate had fallen to 10.2%.

With July’s gain of 1.8MM jobs (following a combined 7.5MM gain in May and June), the U.S. economy has recovered about half of the jobs lost since the pandemic began.

There are still 13MM fewer jobs in the U.S. than there were in February, just before COVID-19 hit.

Source: WSJ, PeerIQ

The headline numbers mask a deeper, and more worrying, trend: 6.5MM people have been unemployed for at least 15 weeks, a record high, and double the 2009 peak.

As we noted previously, the easy job gains are increasingly behind us. It’s hard to move unemployment to <4% until we see a recovery in travel, hospitality, and leisure.

What Now for Forbearance?

Jobless rates are staying stubbornly high, and the federal unemployment boost has expired. Against that backdrop, here at PeerIQ, we’re paying close attention to borrower behavior as they exit forbearance.

Source: PeerIQ Analytics Platform

Extending last week’s analysis, we see pronounced inflection points of borrowers exiting forbearance into current after the 60 day mark and, starting with the April cohort, an acceleration after the 30 day mark.

While borrowers in the May cohort are recovering to current much more quickly than the others, they still appear to be capped at the “80-85% current” threshold identified last week.

This one’s worth watching closely: will any of these cohorts recover past that threshold, even as benefits dry up?

Source: PeerIQ Analytics Platform

Among borrowers exiting forbearance into delinquency, we again see an acceleration among later vintages, with the May cohort moving much more quickly into delinquency.

Unlike those becoming current, we have yet to see a clear “cap” on the delinquency rates; in fact, the share of May vintage loans in delinquency continues to climb after 60 days.

While this accelerated migration to current / delinquent status may say less about the borrowers than their lenders (specifically, limited appetite for additional forbearance extensions), we’ll be watching these patterns closely as the weeks progress.

And we will also be examining the behavior of the June cohort, with a particular focus on how these patterns may change as unemployment benefits trail off post July 31st.

Reach out to your client service contact at PeerIQ to learn more about this analysis, and the other loan-level insights available to users of our platform.

Earnings notes - GreenDot, LendingClub, Square

This week, three major industry participants - Green Dot, LendingClub, and Square - reported second quarter earnings.

Each represents a different slice of the economy, and in combination they give us a solid picture on where corporate America sees opportunities in the next normal.

Green Dot (GDOT)

LendingClub (LC)

Source: LendingClub, PeerIQ

Source: LendingClub, PeerIQ

Source: LendingClub, PeerIQ

Square (SQ) - focused on growing Cash App ecosystem; Omni-Channel/Contact less; seller volumes recovering better than expected

PPP as a Trading Opportunity?

We’ve been hearing increasing chatter in recent days about how many banks are looking at the PPP repayment process with dread. Banks are looking for opportunities to sell down their PPP exposure rather than deal with the administrative burden of the forgiveness process.

American Banker dives into the topic this week, noting that many nonbank lenders (perhaps some among you, dear readers) are more than happy to take on the responsibility. Cross River also appears to be purchasing PPP portfolios, you may want to reach out to learn more.

Rocket Goes Up, Kabbage Heads for the Exit?

Rocket Companies, the parent of Quicken Loans, officially debuted on the NYSE this week, closing up nearly 20% on the day. The IPO pop came after Rocket agreed to cut back on both the IPO size and price.

By midafternoon Friday, RKT had continued its upward trajectory, adding another 8% gain to its IPO day pop.

For the VC & entrepreneur crowd, we recommend reading “Yes Before No: How Dan Gilbert Conquered Mortgage Lending.” It includes war stories and highlights the key turning points that transformed Rocket Loans into the largest non-bank lender in the U.S. today.

Kabbage is rumored to be considering a sale as well, reported Barron’s, hiring investment bankers to explore the possibility after receiving inbound interest. Sources say the firm could trade for $750MM to $1Bn - a strong outcome relative to other small business lenders and a category that is generally in decline. Bids due next month.

In the News:

Lighter Fare: