We are pleased to preview the release of PeerIQ’s inaugural 3Q Public Lender Tracker for release this week. The tracker, a new release from PeerIQ’s research and analytics team, examines credit performance trends across publicly traded banks, FinTechs, and card issuers. We also deep-dive into the earnings of Lending Club and OnDeck. Stay tuned for a release this week and scroll down for an excerpt.
On Wednesday, Keith Noreika, the interim head of the Office of the Comptroller of the Currency, spoke at The Clearing House Annual Conference on Wednesday and discussed the idea of ending separation of banking and commerce. During his speech, Noreika posits that “mixing banking and commerce can generate efficiencies that deliver more value to customers and can improve bank and commercial company performance with little additional risk.” Organizations such as Financial Innovation Now (FIN) have lobbied to reduce barriers to financial services for technology companies. We explored in depth the idea of commercial companies such as Amazon expanding into finance in our recent newsletter. Former OCC Head Thomas Curry shared a similar sentiment at the Online Lending Policy Institute conference in September which PeerIQ analyzed here.
At the same conference, newly appointed vice chairman for supervision at the Federal Reserve, Randal Quarles said “I think that in the regulated area and the industry, in general, we ought to keep looking at what are the implications of the growth of fintech, how it interacts with the traditionally regulated industry.”
To build out its deposit business, Goldman Sachs is rebranding GS Bank to Marcus. Marcus, Goldman’s online consumer lending business, has seen extraordinary growth since its inception. As we discussed in a previous newsletter, Goldman Sachs expects lending will be the most significant driver of net revenue growth in years to come. GS expect $2 Bn in revenue over the next several from lending across Marcus, GS Select, mortgage warehouse finance and other initiatives.
Earlier this week, Intuit announced plans to offer direct lending to small businesses that use QuickBooks accounting software. Intuit plans to lend up to $35,000 for up to six months at rates between 6 and 18 percent. Intuit is a member of Financial Innovation Now along with Amazon, Apple, Google, and PayPal. Intuit has also started to apply its vast small business accounting data to underwrite small business loans. Apple this week introduced “Apple Pay Cash” – enabling consumer to send and receive money.
In its latest letter to investors, SoFi CEO Tom Hutton announced the company is no longer planning to expand to Australia and Canada and will scale back its asset management business, as reported by The Wall Street Journal. Despite the recent management upheaval, SoFi had a record Q3 – $3.5 Bn in loans, $145 MM in revenue, and $56 MM in adjusted profit.
Where Are We In the Credit Cycle?
This week, we include an excerpt from the PeerIQ 3Q Public Lender Tracker. As we continue to observe credit re-normalization trends, many investors and analysts we interact with would like a perspective on where we are in the credit cycle. Below is a summary of C-level comments across leading lenders based on an analysis of recent earnings transcripts.
Overall, lenders were optimistic on credit performance outlook although acknowledged that re-normalization trends are underway amidst a greater supply of credit.
- Citi (Michael Corbat:) “I would say not just in the U.S., but as we look around the world, we would rate the health of the Consumer right now as pretty good And again, what we’ve seen not just here in the U.S. but in many places is a fairly steady consistent rise or at a minimum good stability to housing prices and I think the combination of jobs, a little bit of wage growth, stable housing and rising asset prices has left the consumer in a pretty good place..”
- JPM (Marianne Lake): “So I’ll just start with credit for a second. Because although we absolutely expect at some point that we’re going to see normalization of credit, we haven’t seen that yet. I just want to make that clear. So we are appropriately cautious … but we’re not seeing any deterioration or any thematic fragility in our portfolio that we’re concerned about at this point.”
- Capital One (Richard Fairbanks): “While we’re very obsessive about indebtedness and competitive intensity, I think that we’re in a relatively stable part of the cycle. The economic indicators continue to look pretty benign.”
- Discover (David Nelms): The prime consumer remains healthy, buoyed by a robust labor market, rising home prices and manageable debt service levels. Moreover, the share of heavily indebted consumers, those with payment to income ratios above 40%, fell to its lowest level since 2001. I would add that in October, consumer sentiment reached its highest level in well over a decade. The U.S. consumer continues to feel positive about future prospects for their personal finances and employment.
- OnDeck (Howard Katzenberg): “Overall though, the environment remains favorable for small businesses across the country and our credit outlook is strong.”
- Enova (David Fisher): “We continue to see stable credit metrics across our portfolio.”
- CEO, Ram Ahluwalia will speak on the “A-Z of Securitizations Done to Date” panel at 11:50 AM IMN’s 3rd Annual Investor’s Conference on Marketplace Lending on December 1 in NYC.
- Chief Commercial Officer, Kevin Walsh will also be speaking on a panel at 2:20 PM titled “Improving MPL Liquidity and the Role of Securitization.”
PeerIQ in the News:
- Marcus takes Center Stage at Goldman Sachs After One Year (Lend Academy, 11/9/17)
- SoFi’s Latest Consumer Lending Deal (PeerIQ), Rated: AAA (LendingTimes, 11/6/17)
- Equifax Is Haunted By Its Costly Cyber Attack (Bloomberg, 11/9/17) Equifax incurred $27.3 Mn of costs related to the incident last quarter.
- How Some Small Banks Are Firing the Fed (WSJ, 11/9/17) Banks are cutting costs with self-administered regulatory relief as the benefits of the holding-company structure fade.
- Fintech Lender SoFi Abandons Global Plans, Rethinks Asset Management (WSJ, 11/9/17) SoFi is pulling back on plans to expand into foreign markets and asset management.
- Spending, Charge-Offs Lead to Mixed Picture for Capital One, Discover Financial(11/12/17) An increase in the supply of credit has led DFS to tighten personal loan underwriting.
- Small banks oppose U.S. regulator offering olive branch to tech sector (Reuters, 11/8/17) Keith Noreika calls for review of a ban that prevents retailers such as Wal-Mart and tech companies like Amazon from becoming fully fledged banks.
- Lending Club Plots Two ABS Before Year End (Global Capital, 11/8/17) Lending Club is looking to price two more ABS deals this quarter, as the company plans to shrink its proportion of bank funding in the year ahead.
- Marcus takes Center Stage at Goldman Sachs After One Year (Lend Academy, 11/9/17) Goldman Sachs plans to rebrand their deposit offering from GS Bank to Marcus as well as expand into the UK.
- Quarles says Fed taking ‘fresh look’ at regulation, fintech (American Banker, 11/7/17) Randal Quarles said the Fed is examining its approaches to regulatory and supervisory activities, including stress tests, capital ratios and living wills.
- U.S. Fintech Investments Double (WealthManagement, 11/8/17) Investments in U.S. fintech companies nearly doubled during the third quarter to $5 Bn, up from $2.6 Bn in the second quarter.
- iOS 11.2 Public Beta Update Introduces Apple Pay Cash (MacRumors, 11/7/17) Apple introduces Apple Pay Cash in iOS 11.2 and watchOS 4.2, allowing users to send and receive money through imessage.
- Why banks are sub-branding new customer offerings (tearsheet, 11/6/17) Financial organizations have been dealing with technology-driven shift by introducing sub-brands such as Goldman Sachs’ Marcus, JP Morgan’s Finn, and Wells Fargo’s Greenhouse.
- Intuit Becomes Latest Technology Company to Offer Direct Lending (Bloomberg, 11/7/17) Intuit will start lending directly to smaller businesses becoming the latest tech company to offer credit to firms.
- Medical residency refis may be just what the doctor ordered (American Banker, 11/7/17) SoFi’s new product allows residents to consolidate their existing loans and make a single, $100 monthly payment during residency or fellowship.
- IBM Raises the Bar with a 50-Qubit Quantum Computer (MITTechnology Review, 11/10/17) Researchers have built the most sophisticated quantum computer yet.