EXCLUSIVE— Online lender LendingClub Corp. reported revenue at an all-time high, growth in loan originations, and declining losses during its third quarter earnings yesterday, but its guidance for the fourth quarter has sent its stock plummeting.
LendingClub stock fell 22% in the hours after the company’s earnings call.
The decline comes after the company’s CFO, Thomas Casey, stated company expectations for the fourth quarter during the company’s earnings call: the company is expecting a net revenue of about $158 to $163 million, said Casey, while previous estimates put revenue around $173 million.
The reason for the adjusted guidance is a shift in the company’s loan model, according to Casey. Casey said on the call:
As Scott mentioned, we implemented our fifth-generation credit models towards the end of the third quarter. The improved model allows us to assess risk and price borrowers in a more sophisticated way. As a result, we are seeing improved borrower profile for the applicants we approve.
It will cause a slight headwind for Q4, but we believe these are the right investments to position ourselves for 2018.
LendingClub’s updated model uses machine learning technology to analyze risk and credit decisions, according to the company.
According to data from TransUnion, fintechs now make 32% of all personal loans in the U.S.
Despite the corrected guidance for next quarter, LendingClub revenue for the third quarter was at a historic high of $154 million, a 34% increase year-over-year. LendingClub also saw a 24% YOY increase in originations due to strong borrower demand, according to the company, representing $2.44 billion in loan outstandings.
Banks continue to account for a large part of the lender’s loan originations, with 42% of total platform originations coming from banks this quarter, compared to 44% last quarter. The group generating the next highest portion of originations was managed accounts, with 24% of total originations.
LendingClub stock was down about 17% at 2:45 pm ET, trading at $4.51 per share.1 - Reader Likes This Post