(Adds details from outlook and conference calls)
By Anna Irrera and Rishika Sadam
Feb 14 LendingClub Corp reported its
third straight quarterly loss on Tuesday and forecast
slower-than-expected growth this year, as the online lender
recovers from a scandal related to its business practices.
The San Francisco-based startup has been in recovery mode
since May, when LendingClub acknowledged issues including the
way it had sold loans to an investor, prompting the departure of
then-Chief Executive Renaud Laplanche.
On Tuesday, LendingClub finance chief Tom Casey forecast the
company will generate net revenue of $565 million to $595
million this year, below the $597 million in revenue analysts
On a conference call with analysts, Casey said the company
is starting to turn from "remediation" efforts to build back
trust with investors, bank lenders and other partners that had
taken a step back from doing business with LendingClub. The
company is now focused on growing again, but it will take time.
LendingClub shares fell nearly 7 percent in after-hours
Through most of 2016, LendingClub spent large sums of money
recovering from its operational flaws. But even as its operating
expenses rose by more than 50 percent last year, its loan
originations grew by just 3.6 percent.
LendingClub, one of the largest companies known as
peer-to-peer lenders, runs a web site where consumers can apply
for loans that are funded either by individual investors or by
institutions such as banks.
It was in May that the company said it had altered
documentation when selling $22 million of loans. An internal
probe later revealed that Laplanche and his family had taken out
32 loans on the platform in December 2009 to boost the company's
volumes just four months prior to closing a round of venture
The probe also turned up evidence that Laplanche and former
Chief Financial Officer Carrie Dolan had used some of their
company shares to secure personal loans. LendingClub said the
two were not required to seek approval for the loans.
LendingClub's problems rippled through the broader
marketplace lending industry, softening already weakening
investor appetite and leading banks on the platforms to demand
more proof that loans were solid.
To attract investors back, LendingClub added incentives for
investors and recently made changes to its underwriting
standards and disclosures. The incentives for investors ended in
August and the majority of banks active on the platform prior to
LaPlanche's departure have now returned to buying loans on the
platform, CEO Scott Sanborn said on the earnings call.
Banks accounted for 31 percent of originations in the last
three months of 2016, compared to 13 percent in the third
quarter, the company said. They had accounted for roughly 23
percent of originations in the fourth quarter of 2015.
As LendingClub has been recovering, competition has been
heating up. New entrants like Goldman Sachs Group Inc's
recently launched digital lender Marcus have also entered the
"This market has always been a competitive market," Sanborn
said. "The players shift, their area of focus shifts."
For the fourth quarter, LendingClub posted a loss of 2 cents
per share, excluding special items. Analysts had expected a loss
of 3 cents per share, according to Thomson Reuters I/B/E/S.
Total net operating revenue fell 3.9 percent to $129.2
million, above the average analyst expectation of $121.9
(Reporting by Anna Irrera in New York and Rishika Sadam in
Bengaluru; Writing by Lauren Tara LaCapra; Editing by Maju
Samuel and Tom Brown)