LendingClub Says Average Loan Performance `Within Expectations'

  • Company says it's seeking to clarify Jan. 29 presentation
  • Firm overhauls description of debt once labeled `under-priced'

LendingClub Corp. said it wants to clarify a presentation from last month that showed some loans it arranged had soured more often than anticipated.

Internal models are meeting the company’s expectations for predicting average credit performance on its standard three- and five-year loans, it said in a blog post late Sunday. The post revised a chart released last month by the firm’s LC Advisors subsidiary, which had labeled two segments of three-year loans as “under-priced” without specifying whether they had been included in aggregate performance data shown. The new version of the chart relabels the segments as “underperforming” and emphasizes that total loan performance, including those segments, “falls within expectations.”

The chart “was designed to highlight the routine process by which we identify credit segments that perform either above or below expectations and inform next steps in terms of either adjusting credit policy or pricing,” the company said Sunday. “In this example, we highlighted two segments that were performing worse than expected and took the necessary steps to bring these segments back within expectations.”

LendingClub fell 3 percent at 1:17 p.m. on Monday in New York.

Assessing Borrowers

The stock slid 7.8 percent on Friday after Bloomberg wrote about the original late-January presentation posted by LC Advisors, an investment adviser owned by LendingClub that helps people buy loans arranged by the company. One slide included charts showing write-off rates for a portion of three- and five-year loans were higher than expected, without giving numbers about the size of the segments or describing the characteristics of the borrowers.

As one of the pioneers of marketplace lending -- in which borrowers are matched online with investors who want to fund them -- LendingClub relies on its credit models to quickly assess borrowers and set interest rates on the debts. The firm soared to a valuation of more than $10 billion following its December 2014 initial public offering but has since tumbled to less than $3 billion.

LendingClub’s Sunday blog post provided more information on the underperforming segments. One amounts to 4.9 percent of the three-year loans it originated in a certain period, where borrowers took out more than one installment loan from a bank or another lender in the last year and exceeded a threshold on LendingClub’s proprietary G3 Statistical Model. The other represented 3.4 percent of three-year loans. This segment had a debt-to-income ratio higher than 20 percent and exceeded another G3 threshold. It didn’t provide more data about the underperforming segment of five-year loans.

The post also highlighted a separate group of borrowers whose credit performance was better than expected. They represented 9.3 percent of three-year loans and had a debt-to-income ratio below about 15 percent, among other characteristics.

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