By Peter Rudegeair
Share of LendingClub Corp. surged Monday after the company said loan volume stabilized after the surprise ouster of its chief executive six months ago.
After the San Francisco-based company reported third-quarter results Monday morning, shares rose 19% to $6.10 in morning trading. The loan-marketplace operator reported revenue and adjusted per-share earnings that exceeded analysts' expectations, in addition to a large, new loan-sale arrangement with a unit of one of Canada's largest banks.
LendingClub Chief Executive Scott Sanborn has been working to woo loan buyers who retreated from the online lender after the company's founder and former CEO, Renaud Laplanche, was forced out in May. The company's board asked for Mr. Laplanche's resignation following the discovery of irregularities in the sale of loans related to a bond deal, as well as Mr. Laplanche's investment in an outside investment fund.
"We feel pretty good about really being able to...start to put the majority of this behind us," Mr. Sanborn said in an interview.
LendingClub extended $1.97 billion in loans between July and September, 12% less than the same period last year but slightly more than it extended during the preceding quarter. The company awarded money managers who bought its loans during July and August with around $11 million in cash incentives, only half the amount the company had planned to spend on them, Mr. Sanborn added.
The company also got a boost from new funds that raised billions of dollars from the public in recent months to purchase online loans. Mr. Sanborn said 55% of LendingClub's third-quarter loans were funded by managed accounts, a grouping of investors that includes the new funds. In the third quarter of 2015, such investors accounted for only 36% of loan volume.
Total net revenue, the majority of which comes from fees LendingClub charges borrowers, fell 1.5% to $114.56 million but was above the $103.65 million expected by analysts polled by Thomson Reuters.
Losses during the third quarter totaled $36.5 million, or 9 cents a share, compared with a loss of $81.4 million, or 21 cents a share, in the second quarter. In last year's third quarter, LendingClub recorded a profit of $950,000, or roughly break-even on a per-share basis. On an adjusted basis, LendingClub reported a loss of 4 cents a share, better than the 7-cent loss analysts expected.
In addition to the loan-buying incentives, LendingClub said it recorded around $20 million of "unusual expenses," including costs related to a review the board conducted into Mr. Laplanche's conduct, employee retention and legal fees.
Separately, LendingClub said Credigy Solutions Inc., an Atlanta-based subsidiary of National Bank of Canada that invests in consumer credit, received approval to purchase up to $1.3 billion in LendingClub loans over the next year. Earlier this year, The Wall Street Journal reported that LendingClub had discussed large loan-purchase agreements with hedge funds who, in exchange, asked for equity interests of more than 10% in the company.
Credigy is "a significantly more beneficial deal to us" than others that were on the table, Mr. Sanborn said. It didn't include an equity component and wouldn't require Credigy to raise additional capital to buy the loans, he added.
Austen Hufford contributed to this article
Write to Peter Rudegeair at Peter.Rudegeair@wsj.com
(END) Dow Jones Newswires
November07, 2016 11:33 ET (16:33 GMT)
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