LendingClub Soars on $1.3 Billion Loan-Purchasing Agreement

  • Credigy unit will buy loans with prime credit profiles
  • Online loan marketplace reports second straight quarterly loss

LendingClub Corp., the online-loan marketplace whose shares plunged after its founder’s surprise resignation, jumped the most since its initial public offering after securing a deal with an investor who will buy as much as $1.3 billion in loans.

The shares surged 12 percent to $5.75 at 9:37 a.m. in New York and were up as much as 20 percent after LendingClub announced the purchasing program with National Bank of Canada. The San Francisco-based company also posted its second straight quarterly loss as loan originations remained depressed, putting the firm on track for its worst annual loss, according to a separate statement.

LendingClub has been trying to restore trust with the investors who finance its loans since founder and Chief Executive Officer Renaud Laplanche resigned in May amid an internal investigation into a botched loan sale. The new funds, supplied by National Bank’s Credigy consumer-finance subsidiary, will be deployed during the next 12 months, LendingClub said. Credigy will purchase U.S. consumer loans with a prime credit profile, according to Claude Breton, a spokesman for Montreal-based National Bank.

“We see the Credigy program as a way we’re further diversifying our investor base and adding the funding visibility and stability that can make us even more resilient in various market conditions,” Scott Sanborn, who took over as LendingClub’s CEO after Laplanche’s departure, said in the statement.

LendingClub’s third-quarter net loss of $36.5 million compared with net income of $1 million a year earlier. Originations totaled $1.97 billion, about unchanged from the previous three months and down from $2.24 billion a year earlier. The firm, which was founded in 2006, also said it expects to lose as much as $48 million in the fourth quarter.

Cash Incentives

Legal costs and retention payments related to Laplanche’s resignation were about $20 million in the quarter, and cash incentives paid to loan investors were $11 million, accounting for much of the loss. Those incentives ended in September, though Credigy will get a small one if it invests the full $1.3 billion, Sanborn said in a telephone interview.

In one strategy to reignite growth, LendingClub said in October that it would start offering car loans, a $1 trillion market in the U.S. Its main product -- refinancing credit-card debt -- is facing new competitors, including Goldman Sachs Group Inc., which debuted an online lender called Marcus last month. The program is starting slowly and will ramp up in six or 12 months, Sanborn said in a conference call to discuss the quarterly results.

Laplanche’s resignation was prompted in part by employees’ misconduct in a $22 million sale of loans to Jefferies Group. In a sign LendingClub’s relationship with the investment bank has recovered, Jefferies is underwriting a new offering of asset-backed bonds for LendingClub, people familiar with the matter said Nov. 4.

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