Volatility made an abrupt return to capital markets after a nearly 18 month hiatus. Equity markets dropped almost 10% from their peaks, as investors focused on rising US treasury yields. 10-year yields touched 2.88% – nearly a four-year high. Corporate bonds (CDX.IG spreads) widened 5bps this week to 60bps, while high-yield widened 16bps to 353bps.
No ABS deals have priced during the sell-off. Investors are waiting to see if this sell-off materially affects new issue pricing. Secondary trading in securitized products remains orderly.
US consumer credit grew by $18.4 Bn in December 2017, at an annualized growth rate of 7.7%. Revolving credit card debt increased by $5.1 Bn to $1.03 Tn, the highest on record. Consumer spending has boosted US GDP, although the increasing cost of leverage and rising rates could create a drag on growth.
In regulatory news, the OCC chief Joseph Otting commended the CFPB on reconsidering its payday lending rules and deferring action on additional regulations. We analyzed the CFPB’s new direction here. Also, the CFPB has put the Equifax data breach probe on ice, state attorney generals are picking up the enforcement burden with Equifax facing 240 lawsuits.
Bloomberg’s Julie Verhage reports that Goldman Sachs is close to buying personal finance startup Clarity. Clarity is a personal financial management software that uses AI to help individuals make better financing decisions. GS Marcus has ramped up its acquisitions over the last year as it rounds out its online consumer banking offering.
Goldman’s previous acquisitions were mostly acqui-hires, but the purchase of Clarity would spark a bid and higher valuations for lenders and other originators due the scarcity of technology supply. Separately, GS also announced that it is in talks with Apple to finance iPhone purchases. Below is a timeline of GS Marcus’ acquisitions.
GS M&A Accelerating
This week, we summarize the 3 MPL securitizations this year – two from SoFi and one from Marlette.
Overall, we see larger deal sizes and strong investor demand.
Source: KBRA, Moody’s
We look forward to seeing everyone at SFIG’s ABS Vegas where we’ll dive into more of these trends on the Marketplace Lending Snapshot panel.
- Ram Ahluwalia will speak on the “Marketplace Lending Snapshot: Performance, Review, ABS Issuance Outlook and Funding Trends, and Bank Partnerships” panel at SFIG Vegas 2018 on Wednesday, February 28 at 9:15 AM.
- Kevin Walsh will speak on a panel at SFIG Vegas 2018 titled, “Predictive Modeling: The Role of Big Data and Machine Learning Across the ABS Market” taking place on Monday, February 26 at 4:35 PM.
PeerIQ in the News:
- CEO Monthly Alternative Lending Market Analysis (February 2018)
- Fintech Firms Look to Enter Banking Via Century-Old Tactic (WSJ, 2/8/18) The ILC allows nonfinancial companies to enter the banking sector, avoiding a patchwork of heterogenous state-by-state regulations.
- US states team up to streamline fintech licensing (Finextra, 2/6/18) Bank regulators in seven US states agreed to standardize parts of the licensing process for money service businesses (MSBs) to make it easier for fintech startups to operate across the country.
- Social Finance Evolves Into A Neobank (Bankrate.com, 2/6/18) SoFi is launching SoFi Money as it builds a comprehensive banking offering for consumer assets and liabilities.
- Consumer protection official puts Equifax probe on ice (Reuters, 2/5/18) State AGs are expected to increase enforcement actions as the CFPB retrenches.
- Banks Shutter 1,700 Branches in Fastest Decline on Record (WSJ, 2/5/18) Banks branches continue to shutter. Although the AMZN and APPL retail footprint continues to grow…
- Goldman’s Apple Foray Ups the Ante on Main Street (Bloomberg, 2/7/18) GS Marcus’ foray into Point-of-Sale lending is part of a broader strategy to finance home improvements and vacations, and can upend the incumbents in this space.
- Goldman Is Said Close to Buying Personal Finance Startup Clarity(Bloomberg, 2/7/18) GS is in discussions to acquire personal-finance startup Clarity Money, as it beefs up Marcus.
- Goldman Sachs in Talks With Apple to Finance iPhone Sales (WSJ, 2/7/18) GS is in talks to offer financing for Apple products. This follows Barclays move to partner with Uber, and Better Mortgage partnership with AirBnB.
- NYC-Based Behalf Secures $150 Million in Debt Capital (BusinessWire, 2/5/18) Behalf secured $150 Mn in debt financing to grow its B2B lending platform.
- Pyongyang Tries to Steal Cryptos before Pyeongchang Olympics (BitCoin News, 2/11/18) Ironically, BitCoin appears to have won the backing of a sovereign looking to boost its reserves and cross-border trade.