Lending Club Makes Big News for the Wrong Reason
Today marketplace lender Lending Club released their Q1 2016 earnings. Unfortunately they also announced that company had tendered the resignation of founder and CEO Renaud Laplanche. His exit stems from an internal review of the sale of $22 million in loans to a single investor that, according to the company, violated the investor’s explicit requests, which the company says was a non-credit and non-pricing element. Ultimately the loans in question were repurchased by Lending Club and then resold to another investor at par and had no material impact on quarterly earnings.
Scott Sanborn, Lending Club’s President, has taken over as acting CEO while Hans Morris has been named Executive Chairman. In a statement Morris said, “A key principle of the Company is maintaining the highest levels of trust with borrowers, investors, regulators, stockholders and employees. While the financial impact of this $22 million in loan sales was minor, a violation of the Company’s business practices along with a lack of full disclosure during the review was unacceptable to the board. Accordingly, the board took swift and decisive action, and authorized additional remedial steps to rectify these issues. We have every confidence that Scott and the management team are well positioned to lead Lending Club forward.”
The shocking news about Laplanche’s departure greatly overshadowed the news of what was a strong quarter for Lending Club. The company posted revenues of $151.3 million beating estimates of analysts such as Zacks. Additionally this figure was a year over year increase of 87%.
Compared to Q1 2015 the company also saw 68% more loan originations with Q1 2016 hitting $2.75 billion in loans funded through the Lending Club platform. Since its inception in 2007 the company has now facilitated over $19 billion in loans. Earnings per share this quarter were one cent while adjusted earnings per share were five cents.
There’s no doubt that Laplanche’s resignation will have a major effect on the company and subsequently its stock. However the decisive response from Lending Club over these violations of their standards coupled with strong quarterly earnings show that they’re ready to march on in spite of these recent challenges. In fact, while Lending Club’s stock has fallen since its post-IPO high, the company has still managed to see spectacular growth in loan originations, which seems to suggest that borrowers and platform investors are not on the same page as Wall Street when it comes to this company or FinTech in general. Hopefully with some new leaders in place Lending Club can maintain or even improve upon its current growth, prove Wall Street wrong, and continue to lead the FinTech industry.
Also published on Medium.