LendingClub Corporation Q3 FY2025 earnings call

• Quarterly originations of $2.62 billion exceeded guidance, driven by strong consumer and investor demand, marketing efforts, and a winning value proposition. • Disciplined underwriting led to strong asset yield and borrower base performance, with ~40% credit outperformance vs competitors. • Net interest income reached $158 million, the highest ever, enabled by a growing balance sheet and expanding net interest margin. • Marketplace revenue grew 75% to a three-year high, with structured certificate sales over $1 billion and a memorandum of understanding with BlackRock for up to $1 billion in purchases through 2026. • LevelUp checking launched in June with 7x account openings vs prior checking product, driving member engagement and product adoption. • Balance sheet stands at over $11 billion, providing a durable revenue stream.

Quarterly originations reached $2.62 billion, representing a 37% growth year over year. Revenue grew 32% to $266 million. Net interest income hit a record high of $158 million. Marketplace revenue grew 75% to over $100 million. The balance sheet stands at over $11 billion. Originations growth was driven by strong demand from consumers and loan investors, increased marketing efforts, and a compelling value proposition. The loan marketplace thrived with marketplace revenue up 75% and structured certificate sales totaling over $1 billion. LevelUp checking saw a 7x increase in account openings compared to prior checking product.

• Q4 originations expected to be $2.5 to $2.6 billion, up 35% to 41% year over year. • Pre-provision net revenue outlook is $90 million to $100 million, up 21% to 35%. • ROTCE expected in the range of 10% to 11.5%, more than triple year over year. • Outlook assumes two interest rate cuts in Q4 and increased marketing investment to support future originations growth.

• Competitive pressures could impact market share and pricing. • Changes in interest rates may affect net interest margin and loan sales prices. • Credit performance could be affected as recent vintages mature, potentially leading to higher charge-off ratios. • Regulatory changes could impact business operations and compliance costs.

Q: Talked about disposition plans between structured certificate, whole loans, and extended seasoning, and plans to grow held-for-investment portfolio.

A: Drew LaBenne said HFI for Q4 is roughly $500 million, mix and disposition roughly same, with demand for structured certificates and rated product strong, prices for insurance-rated transactions approaching bank prices.

Q: Competitive state of the market and impact on underwriting standards.

A: Scott C. Sanborn said no impact on underwriting standards, growth is focused on profitable sustainable originations, not temporary growth through short-term credit risks.

Q: What drove higher loss in net fair value adjustment?

A: Drew LaBenne said positive adjustments in both Q2 and Q3, larger in Q2; also natural roll down in larger extended seasoning portfolio affects the line.

Q: Demand for marketplace loans, structured certificates, and seasoned portfolio and industry differentiation.

A: Drew LaBenne said demand is strong, track record matters, and LendingClub is a partner of choice, with appetite for loans still strong despite some investor concerns.

Q: Credit performance and themes seen.

A: Scott C. Sanborn said no broad themes in credit performance, underwriting remains restrictive, and portfolio performance is in line with expectations.

Q: Marketing spend as percentage of volume and future outlook.

A: Scott C. Sanborn said there's still opportunity to optimize marketing channels, with ongoing efforts to improve targeting, creative, and response rates.

Q: BlackRock program and insurance sales channel.

A: Drew LaBenne said BlackRock purchases through marketplace programs, insurance pool is deep, and efforts to grow insurance channel to improve loan sales prices.

Q: Delinquency trends amongst FICO bands and impact on originations.

A: Scott C. Sanborn said monitoring application profile, but no direct impact seen yet, and adapting to any shifts as needed.

Q: Difference in origination growth across issuers and originators.

A: Scott C. Sanborn said focus on profitable sustainable growth, not just dollar originations, with 37% growth, strong credit outperformance, and record pretax income.

Q: Status of potential rebrand.

A: Scott C. Sanborn said in final stages of planning, entering execution phase, new brand to give broader permission set, likely next year.