P2P Lending Service Lending Club Filed a preliminary prospectus today with the SEC to prepare the IPO. Lending Club aims to raise 500 million US$ in the public offering. The document does not set a share price or a company valuation, which will happen later on in the process. The underwriters are Goldman, Morgan Stanley, Citi, Stifel, BMO, Allen & Co., William Blair, and Wells Fargo. In the first half oof 2014 Lending Club had a revenue of 87.3 million US$ and a net loss of 16.5 million US$. S. The company had 2.33 billion US$ in p2p loans on its balance sheet as of June 30.
This is a huge boost for p2p lending and will raise lots of awareness in the US and internationally for the innovative industry.
Rapid growth of Lending Club’s loan volume since launch in 2007
Renauld Laplanche, CEO of Lending Club, announced today that Lending Club and Union Bank will partner to develop and offer products to the 1 million customers of Union Bank. Lending Club has partnered with several smaller banks in the 12 to 18 months. Laplanche sees great potential for more of the 6,000 banks in the US to partner with the p2p lending industry and profit from leaner processes the new players offer.
Source: Lending Club
Renauld Laplanche speaking at LendIt 2014
Asked whether Lending Club has plans to go international he says the focus is on the US. But the time may come for international expansion but that is at least 2-3 years of.
Lending Club announced today that it has acquired Springstone Financial for a total consideration of 140 million US$ in cash and stock. Springstone provides financing options for consumers looking to finance private education and elective medical procedures through a network of over 14,000 schools and healthcare providers.
“The acquisition of Springstone is significantly expanding the services we offer to help consumers achieve their goals,” said Lending Club CEO Renaud Laplanche. “Parents looking to finance their children’s education and patients undergoing elective procedures will now have access to Lending Club loans and benefit from responsible, transparent and affordable financing options.”
Mike Gilroy, CEO of Springstone, said, “Lending Club has established a great reputation as an innovator. We’ve built strong bridges between providers and patients and between educational institutions and parents. We’re excited to become part of the Lending Club platform, which will bring new financing options to our network.”
As part of the financing of this transaction, Lending Club also announced the closing of an equity capital raise. Investors in the $65 million round included funds and accounts managed by T. Rowe Price Associates, Inc., Wellington Management Company, LLP, BlackRock and Sands Capital. According to Peter Renton the valuation of Lending Club at this round is at 3.76 million US$.
“We believe that Lending Club has an opportunity to transform an important part of the banking system into a transparent online marketplace,” said Henry Ellenbogen, Portfolio Manager at T. Rowe Price Associates, Inc. “The Springstone acquisition is another step in that direction, and we are very excited at the prospect of being a long term equity partner of Lending Club.”
Lending Club also raised $50 million in debt financing to fund the acquisition.
March brought growth for the major p2p lending services. Ratesetter managed to pass Zopa and Funding Circle in newly originated loan volume in the UK. I added one new service to the table. Note that I have switched the reporting currency to Euro as all but two services are located in Europe. Several p2p lending services reached major figures for total loan volume funded since inception:
I do monitor development of p2p lending figures for many markets. Since I already have most of the data on file I can publish statistics on the monthly loan originations for selected p2p lending services.
Table: P2P Lending Volumes in March 2014. Source: own research Note that volumes have been converted from local currency to Euro for the sake of comparison. Some figures are estimates/approximations.
Notice to p2p lending services not listed: If you want to be included in this chart in future, please email the following figures on the first working day of a month: total loan volume originated since inception, loan volume originated in previous month, number of loans originated in previous month, average nominal interest rate of loans originated in previous month.
A huge step for Lending Club. Yesterday they launched loans to businesses. Lending Club business loans will range from 15,000 US$ to 100,000 US$ initially, with plans to increase to 300,000 US$ in the future. The loans carry fixed interest rates starting at 5.9% with terms of one to five years and no prepayment penalties. While Lending Club already offered loans that were used for “business purposes” in the past, these were actually consumer loans – the borrower was an individual rather than a company. Obviously the application process and the evaluation of creditworthyness needed to be redesigned for this type of loans.
This will have a big impact on the p2p lending market in the US. It vastly increase the potential market size and will enlarge the choice of loans that investors can lend to.
If you are not totally new to p2p lending then you probably already heard the list of competitive advantages the p2p lending services have over banks: They don’t need branches, they don’t have old legacy infrastructure/software they need to maintain, they need less staff, their processes are faster, …
But how can this advantage be quantified?
On the Lendit 2013 conference Lending Club CEO Renauld Laplanche told the audience about a study conducted by McKinsey that calculated the cost advantage Lending Club has compared to a typical bank. He showed this chart:
For 2015 the chart projects a cost advantage for Lending Club of over 400 basis points over banks. This is huge. Not surpisingly Lending Club has the biggest advantages by maintaining no branches and in collection and origination. or marketing Lending Club will have higher costs than banks.
Banks will eventually embrace p2p lending
Laplanche foresees that more and more banks will actually make use of p2p lending services as platforms to invest or to fund their borrowers to profit from the faster processes and the lower costs. At the conference Laplanche announced the first cooperations with banks and says he expects more to come.
His reasoning is that p2p lending like many other innovations will pass through 3 stages: rejection, adoption and then acceptance by the incumbents. Following this argument, p2p lending could right now be early in the stage of adoption by the industry.
He showed this chart to illustrate how the music industry reacted to disruption by Apple:
