The US economy grew by 2.6% in the 4th quarter, continuing the pattern of strong trend growth in 2017. Global economies continue to enjoy an unusual period of synchronized growth, a constructive pattern last seen in the mid-2000s. US growth was primarily driven by consumer spending of 3.8%. US consumer spending is supported by US consumer credit outstanding which grew at an annualized rate of 8.8% – well ahead of GDP growth.

Bank earnings continued to roll in this week. Retail banks reported that credit card losses rose 20% year-over-year to $12.5 Bn.  Credit card losses as a percentage of outstanding receivables have increased to 4.5% from 2.9% in 2015 as credit normalization trends continue. The combination of high consumer credit growth relative to GDP, full employment levels, and low productivity growth is casting doubts on whether 3%+ GDP prints are sustainable.

In industry news the WSJ reports that, Anthony Noto, the former COO of Twitter, is the newly appointed CEO of SoFi. Noto has significant experience as a banker at Goldman Sachs and led Twitter’s IPO process. SoFi is focused on expanding its product offerings and deepening relationships with customers by expanding into savings and payment products. This spring, SoFi is launching SoFi Money, a no-fee checking account and debit card bundle in partnership with Delaware-based WSFS Financial. American Banker’s Kevin Wack has a nice summary of industry reactions.

In securitization news, SoFi and LendingClub are gearing up for a busy issuance calendar this quarter, with SoFi potentially issuing its first $1 Bn deal. Kroll has rated SOFI’s latest consumer loan deal SCLP 2018-1 AA+ on the senior tranches. The $650 Mn deal has a weighted average loan balance of $32k, credit score of 744, and a remaining loan term of 64 months. Lower excess spread of 5.6% has raised the senior credit enhancement to 29.3% with a 9% OC balance. LendingClub is also expected to issue deals from its Prime and Non-Prime programs this quarter. The deal velocity would continue a 19 months issuance streak, coming on the heels of record issuance in 4Q 2017.

In Fintech financing news, Streetshares raised $23 Mn in a Series B round led by Rotunda Capital. Streetshares, led by CEO Mark Rockefeller, provides small business and government contract financing for the military and veteran market.

CFPB director Mick Mulvaney published a letter to CFPB employees to lay out the direction in which he wants to take the bureau and vowed to stop “pushing the envelope”. Overall, the director is limiting the scope and mission of the CFPB and shifting to a rule-making framework.

In this week’s newsletter, we interpret key points of Mulvaney’s letter and how they may affect the lending industry.


PeerIQ in the News:

Industry Update:

  • Lenders Root for Education Bill (AB Alert, 1/26/18) With the House of Representatives about to consider changes to federal student-loan programs, private lenders are sizing up growth opportunities that could result.

Lighter Fare: