LendingClub Loss exceeds $84 billion. LendingClub Corp, the online loan company, reported its largest loss for a year on Monday after its Chief Executive and founder left the company under a cloud. Renaud Laplanche resigned May 9 after it was found he and his family had taken 32 loans themselves to boost the company’s performance in 2009. This was only four months before closing a round of venture capital funding.
Online Loan Business
LendingClub’s business is an online loans brokerage, involving matching borrowers with suitable lenders. It reported a second quarter loss of $81.4 million equivalent to 21 cents/share. This compares to a loss the same period last year of $4.1 million. For a company that was regarded as the leading light of online lending, this year has seen lending cheating, 179 employee job losses, an investigation by the U.S. Dept. of Justice and loan investors leaving in droves.
New CEO and president, Scott Sanborn, believes that the firm has ‘accomplished quite a bit’ since Laplanche’s exit on May 9. There sure seems to be a lot more to accomplish because LendingClub’s shares were down to $4.68 in after-hours trading, down over 2%. In December 2014, when LendingClub went public, the market value of the firm was $5.4 billion, offering $15 per share, but it is now down to $1.8 billion at $4.68/share.
LendingClub Loss Reasons
These issues were highlighted with a reduction in second-quarter loan originations (new loans) rising by only 2.4% compared to the second-quarter figure of 68% – and 90% a year ago! This is largely connected with increasing defaults, and a reduction in the need, or desire, for loans over the past year. Corporate interest reduced after the Laplanche issue.
Sanborn is upbeat about the situation, and informed existing investors that of the top 20 investors who left LendingClub, 15 have since returned – though in a lesser capacity. They may be testing the water, although the banks who were affected are proving slow to return.
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