LendingClub Deposits Reach $7.5B as Embedded Finance Beckons

LendingClub noted in its latest results that deposits on its balance sheet grew as customers gravitated to high-yield savings products, credit quality was strong — and embedded finance solutions may offer a new avenue of future growth.

As detailed in the most recent earnings materials, deposits of $7.5 billion represented an increase over the $7.3 billion in the prior quarter, primarily due to an increase in high-yield savings and certificates of deposits.

Loan originations of $1.6 billion were comparable to the prior quarter, with a significant driver coming from personal loans tied to structured certificate program, at $785 million of that tally. 

Appetite to Refinance

And as CEO Scott Sanborn said during the call, consumers’ appetite to consolidate and refinance their debt, particularly credit card debt, has been strong. As has been widely reported, revolving debt held by U.S. consumers has topped $1.3 trillion, and card-related interest rates have topped 21%.

In a nod to marketplace momentum, where the company has seen marketplace loan pricing improvements, Sanborn observed that among institutional investors there is “consistent” demand from asset managers, and conversations with “select banks are gaining momentum.”

In the meantime, he said, LendingClub’s “flexible technology allows us to rapidly respond” to changing market dynamics, while refinancing and other loan activity helps in “coiling the spring” for growth. 

Company materials stated that LendingClub’s 30-day delinquency rates have been consistently lower than marketplace lenders and direct competitors across all FICO bands. CFO Drew LaBenne said on the call that net charge-offs on loans held for investments have likely peaked.

In the meantime, the company has guided to $1.6 billion to $1.8 billion in originations in the current quarter.

Investors sent LendingClub shares 4% higher in after-hours trading on Tuesday.

Sanborn said on the call that, three years after LendingClub acquired Radius Bank and a few months after it completed and exited its standard operating agreement with a new bank with the Office of the Comptroller of the Currency, the company will seek to do more with its platform model and data. 

The new initiatives include a greater emphasis on giving members additional financial wellness tools, including debt monitoring solutions being tested with select members that will have broader rollouts. Present tests reveal that enrolled members “with visibility into their credit profiles, current debt and cost of that debt,” are visiting LendingClub up to 50% more often than those not enrolled, Sanborn said. 

Sanborn also stated that there will be “turnkey embedded finance” functionalities that are being tested and will allow, in Sanborn’s words, “digital delivery of personalized, prescreened loan offers” via advertisers and with integration with several, select partners by the end of 2024.

The data-driven approach is being tested on LendingClub’s own site and will help present offers to would-be borrowers in real time, offering LendingClub partners a “source of qualified source traffic” vs. a broad-based, nonqualified outreach.