Lending Club lines up new ABS

Lending Club has filed deal documents for a securitization backed by prime consumer loans after executives indicated this month that the company will issue two deals before year-end.

  • By Sasha Padbidri
  • 21 Nov 2017
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The California-based online lender filed documents with the US Securities and Exchange Commission (SEC) on Monday evening for the transaction, Consumer Loan Underlying Bond (CLUB) Credit Trust 2017-P2.

JP Morgan andCiti are leading the deal, according to the documents.

In a November 7 earnings call, Lending Club executives announced that the company will bring two deals this quarter as part of its plan to deliver $50m in securitization-related revenue in 2017.

The online lender first debuted a multi-seller transaction backed by non-prime loans in June, followed by a prime loan securitization in September. Since then, the company’s ABS program has brought in a total of 30 new investors, according to data from PeerIQ.

During the call, the executives added that Lending Club will also be shrinking its proportion of bank funding with the conclusion of its year-long agreement with Credigy, a National Bank of Canada subsidiary.

The deal will be the third marketplace loan ABS of November. A source said that the high volume of deals in 2017 can be attributed to the maturing of the online lending sector and growing familiarity among investors with deal structures and the underlying collateral.

“At the end of the day, the lenders with the most success are those which use more traditional ways of attracting capital — and I think once the key players like Lending Club expanded its capital market hires and launched its multi-seller platform, and Prosper closed its deal with the consortium of institutional investors, that really drove liquidity for marketplace lending ABS,” the market observer said.

Tightening underwriting standards

This month, Lending Club launched its fifth-generation credit model. The lender claims its model incorporates the latest machine learning techniques to “derive more than 100 customised and behavioural attributes” and evaluate credit trends at a “much more granular level”, reflecting the company’s push to reduce lending to riskier borrowers. The new model does not rely on FICO scores, the company said on its website.

“Some of the loans had not been performing the way they were initially projected to,” a source at a data and analytics firm told GlobalCapital, referring to earlier loan vintages from 2015 and 2016.

“We’re seeing higher losses [on those vintages]. What is happening now is that there’s been a push to tighten underwriting standards, so Lending Club has already stopped selling its ‘F’ and ‘G’ grade loans to investors. A lot of issuers tweak their credit model every quarter to improve underwriting and price risk better,” the source said.

A Lending Club spokesperson declined to comment on whether this deal features loans underwritten by the new credit model. 

  • By Sasha Padbidri
  • 21 Nov 2017

GlobalCapital European securitization league table

Rank Lead Manager/Arranger Total Volume $m No. of Deals Share % by Volume
1 Bank of America Merrill Lynch (BAML) 7,026 25 11.95
2 Citi 6,449 21 10.96
3 BNP Paribas 5,093 18 8.66
4 Barclays 4,040 11 6.87
5 Lloyds Bank 3,615 14 6.15

Bookrunners of Global Structured Finance

Rank Lead Manager Amount $m No of issues Share %
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1 Citi 120,318.45 348 12.81%
2 Bank of America Merrill Lynch 99,988.41 288 10.64%
3 Wells Fargo Securities 88,516.28 265 9.42%
4 JPMorgan 69,240.12 209 7.37%
5 Credit Suisse 51,378.45 156 5.47%