Lending Club Posts Strong 1H 2009, Loans Growing 7% Per Month
Lending Club, the P2P lending marketplace which re-opened with SEC approval last October, has seen steady and impressive growth through the first half of 2009. The company has funded $18.2 million in loans since January 2009, and loan growth has averaged nearly 7% month-over-month during that period. According to a blog post in June by CEO Renaud Laplanche, as of May 31, Lending Club had 140,000 registered users.
The chart below, based on Lending Club’s downloadable statistics, shows loan volume in blue over the two years that the social lending site has been in operation. The red line shows the average credit grade* of Lending Club loans during those months (downward trend indicates improved credit quality).
The blue chart looks fairly ragged, but there are a few reasons for that:
- Lending Club opened as a Facebook-only application in Jun 2007, and only opened to the public (outside Facebook) in Sep 2007.
- In April 2008, Lending Club went into a self-imposed quiet period to register with the SEC. During that six month period, Lending Club continued funding a select number of borrower requests from their own funds.
- Although they re-launched with SEC approval in October 2008, Lending Club continued funding loans from its own pocket, up to a third of loans funded through 2008 and to a lesser extent in 2009. This helps to explain why loan volume jumped so dramatically coming off SEC approval. (Sales reports filed with the SEC since March 2009 seem to indicate that LC has curtailed the practice of funding their own loans.)
Surprisingly, the trend on loan credit quality is improving. Excluding the Facebook-only period, the average credit grade during Jun 2009 was just above a middle-B, the highest credit quality mix ever in Lending Club history. This could be based on a number of factors, but I suspect that it is a combination of lender anxiety (only funding the highest-quality loans as the economy drops further into recession) and Lending Club tightening their underwriting policies as they watch defaults roll in on older portfolios. (The default rate on that early period of Sep 2007 – Apr 2008 is 10.35% according to Lending Club’s statistics page.)
In any event, this is a strong showing for Lending Club, and gives them the kind of momentum they will need to continue growing their business and the whole peer-to-peer lending space. It will be exciting to see what the second half has in store for them.
Here is the data for the chart above:
* Average credit grade is calculated based on the letter grade of each loan issued, regardless of the sub-grade. For example, A1 and A5 are both treated as an A credit grade.
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[...] Lending Club continues to grow at a solid pace, and is on track to fund about $4.1 million in loans during August 2009, which would be an increase of 6% over the previous month. This also puts Lending Club at about 4x the loan volume of their nearest competitor Prosper, who relaunched in July and will be completing their first full calendar month with around $1 million in loans funded. At $4.1 million, Lending Club’s August 2009 performance would not be their highest-grossing month ever. That high water mark was set back in March 2008, shortly before Lending Club closed down for SEC registration. Loans during that period likely included a high volume ofloans funded by Lending Club themselves, as disclosed in their S-1. Lending Club has since stopped the practice of bankrolling their own loans. [...]