The quest for regulatory clarity made significant progress in recent weeks. State regulators, faced with the prospect of a Federal OCC charter, are responding to calls for harmonization in state-by-state lending laws. American Banker reports that states are coordinating to develop a single, harmonized regulatory structure for FinTech firms.

Congress may clear up the regulatory uncertainty introduced via Madden V. Midland before year end. Representatives Gregory Meeks, (D-NY) and Patrick McHenry (R-NC) introduced Protecting Consumer’s Access to Credit Act of 2016. The bill reaffirms the “valid when made” doctrine, which holds that interest rates originated by national banks are legal even after a loan is assigned to a third-party. Political insiders assign favorable odds to the passage of the bill due to its bipartisan support.

Research has shown that the Madden V. Midland district court ruling has “significantly reduced credit availability for riskier borrowers”. PeerIQ has also observed a significant reduction in the willingness of warehouse lenders to finance loans subject to “Madden Midland” risk.

In credit trends, for the first time since 2012, TransUnion’s Q2 2017 Industry Insights report shows a decline in origination across a majority of subprime credit products.

With earnings season behind us, this week we summarize key takeaways across three cohorts of publicly traded lenders: bulge bracket banks, non-bank lenders and FinTech firms, and card issuers.

Bulge Bracket Banks

Exhibit A

Source: PeerIQ; Bloomberg

Compared to a year ago, all of the banks have increased their focus on lending business lines as revenue from trading continues to come under pressure.


  • Wells Fargo has the highest Net Interest Margin of all the banks, followed closely by Citi and Bank of America; GS and MS trail on NIM primarily due to higher funding costs.
  • Goldman’s interest income increased 27% vs last year, neck-and-neck with Morgan Stanley at 26%. Goldman increased its lending portfolio 45% YTD to $4.2 Bn. The lending portfolio includes consumer loans generated by Marcus (8% of total) as well as corporate loans (47%), private wealth lending (25%), and CRE and residential real estate lending (20%). Unlike every other bank, GS has seen an increase (40%) in its loan loss reserves consistent with the growth of its lending portfolio. GS also enjoyed the largest improvement in interest income and ROE followed closely by Morgan Stanley.
  • Funding costs across all banks increased sharply year-over-year, and at a higher rate than growth in interest income, as banks pay higher rates on demand deposits, CD, and overnight funding. The large money-center banks with large retail branch footprints show the least sensitivity to rising rates.

Non-Bank Lenders & FinTech 

We note that performing a true comparable analysis is difficult since the P&L and balance sheet dynamics of capital-light marketplace lenders differ substantially from balance-sheet lenders. (We illustrate these differences here.)

Source: PeerIQ; Bloomberg


  • OneMain is leading the pack in YTD stock performance by a large margin. OMF has improved ROE and NIM while keeping charge-off rates to mid-single digits. Those numbers should improve as OneMain has now successfully completed its integration with Springleaf.
  • Except for Enova, all of the non-bank lenders increased their reserves as a % of total loans outstanding.
  • We see a trend of higher net-charge off rates and increased reserves. We believe this reflects prudent risk management and responsiveness to changing borrower behavior (e.g., stacking, greater access to credit, late stage credit cycle dynamics, etc.)

Card Issuers

Source: PeerIQ; Bloomberg

Of the three cohorts we looked at, the card issuers are arguably the most bipolar with regards to recent performance. On one end of the spectrum, American Express rallied ~17% YTD while the stock performance of its peers are down for the year.


  • AXP is sporting 8.5% year-over-year net revenue growth and has the lowest net charge off ratio amongst the cohort. Amex announced $68 Bn in loans as of Q2 2017, 11% increase year-over-year. Amex also has the highest efficiency ratio of its cohort at 68% followed by Capital One (45%), Discover (38%), and Synchrony (30%). Amex has grown its commercial lending business 4% year-over-year.
  • Berkshire’s recently disclosed stake in Synchrony Financial rallied the stock over 4% after hours on Monday, helping them recoup some of their YTD losses (We note Berkshire Hathaway owns sizeable positions in two other household consumer lending brands–American Express and Wells Fargo).
  • Of the four card issuers, Capital One is the only issuer with auto loans, which make up 21% of their total loan portfolio.


  • Ram will speak on the “Trends in Online Consumer Lending: Less Tech, More Fin?” panel on Monday, September 18 at ABS East in Miami, FL.

PeerIQ in the News:

Industry Update: 

Lighter Fare: