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Lending Club Financial Analysis

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4In today’s market, savers are getting peanuts for returns and borrowers are paying double-digit interest rates on credit cards, if they're lucky enough to get them. There must be a better way, right? The FinTech industry is revolutionizing how we think about money, bringing together people who have money and people who need money on an online platform

The FinTech industry introduced peer to peer lending, also known as P2P, as a method of debt financing that allows individuals to lend and borrow money without using an official bank as an intermediary. Lending Club is the most significant player in the game with 45% market share in the US, allowing consumers and small business owners to lower their cost of credit and enjoy a better experience …show more content…

Borrowers create unsecured loan listings ranging from $1,000 to $40,000 on its website. Credit worthiness is based on their credit store, credit history, desired loan amount and debt-to-income ratio. Each approved loan is assigned a credit grade which dictates their interest rate and fees. To reduce default risk, high-credit worthy borrowers are focused on and approximately 90% of loan applications are denied. Only borrowers with FICO scores of 660 or higher can be approved (Lisa, …show more content…

FinTech challenges big banks, giving consumers another choice. As a trailblazer in the field, the company raised a staggering $1 billion in what was the largest technology IPO in the United States. While this industry is relatively new, P2P lending has proven to be the most successful innovation in the the consumer credit market, however, it has not been without hardships. In 2016, the company had a difficult time attracting investors and therefore, had to increase the interest rate charged to borrowers which caused a large drop in share price.

On Thursday, September 28, 2017 Lending Club was upgraded from “perform” to “outperform” by Oppenheimer on compelling risk/reward levels. Currently, LC is valued at $6.45, however, Oppenheimer set a $7 price target and Credit Suisse an $8 price target per share. According to analyst Jed Kelly, “LC is creating a stickier investor base with a higher bank and retail mix and utilizing a $760 million balance sheet to grow its securitization channel.” According to their CEO, Lending Club has a $10.2 billion loan portfolio that generated over $18 million in revenue in just the first quarter of 2016 (Blitchock, 2017). Net revenue “spiked 39% to $139.6 million in the second quarter of 2017, beating Wall Street’s estimate of 136.4 million”, according to Thomas Reuters (Irrera, Lahiri,

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