Lending Club said Tuesday that it will cut 12 percent of its workforce, and also named Scott Sanborn as its permanent chief executive as the embattled online-loan company deals with more fallout from the forced resignation of ex-CEO Renaud Laplanche.
Sanborn had been serving as interim CEO since early May, when Laplanche resigned amid a a company review of Lending Club s loan practices. Lending Club also said Hans Morris will become chairman of the company s board of directors after having been interim executive chairman.
The latest executive appointments for the San Francisco-based loan marketplace come as Lending Club said it will shed 179 jobs due to lower loan volumes in the second quarter and recognizing that fully restoring investor confidence may take time.
The investor confidence on which Lending Club spoke was shaken in May, when Laplanche was forced to resign after an internal company review found $22 million in loans were made against the express instructions of an investor. On Tuesday, the company said in a Securities and Exchange Commission filing that after further investigation, it had found that Laplanche and some of his family members used the Lending Club platform to take out 32 loans in the second half of December 2009.
Lending Club said the purpose of those loans, which totaled $722,800, was to lift Lending Club s total loan volume for 2009 s fourth quarter — in effect, helping the company s loan volume reach levels expected by industry analysts. Lending Club said all of the loans were paid back and that it believes neither Laplanche nor his family members took out any more improper loans after December 2009.
Lending Club has been one of the leaders in the so-called online loan marketplace industry. The company doesn t loan money directly, but provides an online arena to link banks and other financial institutions with borrowers. The company makes money off loans that it helps generate, and thus, the greater volume of loans it originates, the more money it can earn.
However, Lending Club said it expects to write about one-third fewer loans in the second quarter than it did in the first quarter of the year. That would mean the company expects to write about $1.8 billion worth of loans in the second quarter. Jefferson Harralson, an analyst who covers Lending Club for Keefe, Bruyette & Woods, said the decline in loan originations is likely to draw some concern about investors faith in Lending Club s business.
That s the part of everything today that matters the most, Harralson said. We we re expecting $2.1 billion (in loan orginations), and (Wall) Street was expecting something in that range. Lending Club is saying they will be on the low end of expectations and that may bode more negativity.
But Harralson also said Lending Club s business model remains solid, and lowering expectations about its volume of loans lets the company establish a new base to build upon.
They have a business model that should be able to survive a funding shock, Harralson said. And they have one now.
Lending Club s shares rose 4 percent to $4.48 Tuesday. However, the stock is still down by almost 60 percent for the year.
Photo: Lending Club CEO Scott Sanborn. (Courtesy of Lending Club)
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