Lending Club looks for reprieve in year of bad news

Lending Club shares, down as much as 5 percent Tuesday, managed to crawl back above their break-even level as the company deals with more fallout from what has turned out to be the Year of Bad News for the San Francisco-based online loan marketplace.

The latest black eye for Lending Club came late Monday, when the company reported a second-quarter loss that ballooned from a year ago due to a big drop in loan volume. Lending Club said it lost $81.4 million, or 21 cents a share, on revenue of $103.4 million, compared with a loss of $4.1 million, or a penny a share, on $97 million in sales a year ago. Excluding one-time items, Lending Club lost 9 cents a share.

Those results fell short of the estimates of analysts surveyed by Thomson Reuters, who forecast Lending Club to lose 2 cents a share on $100.5 million in revenue. Lending Club said one of the main factors in its results falling short was that its loan volume, or the value of the loans it handled during the quarter, fell by 30 percent from a year ago to $1.96 billion. The company also said its loan volume would be flat for the rest of the year.

There was also another shake up in Lending Club’s executive ranks, as the company announced the departure of Chief Financial Officer Carrie Dolan.

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Dolan’s departure comes about three months after Lending Club founder Renaud Laplanche was forced to resign amid a scandal involving loans that were made against the instructions of an investor, as well as Laplanche and his family members improperly using the Lending Club platform to take out multiple loans in late 2009.

In late June, Lending Club named Scott Sanborn as its new full-time CEO, and the company also cut 179 jobs, or about 12 percent of its workforce.

All of that added up to hammer Lending Club’s shares this year, as the company’s stock price fell by more than 56 percent from the start of the year until Monday’s market close. And the shares were headed further south Tuesday, until things began to turn around.

It wasn’t a huge gain, but Lending Club’s share price rose 2.3 percent to $4.90, as some investors eased up on their concerns. Despite the overall negative tone of Lending Club’s results, and year in general, there was at least one bright spot in its report, that being loan originations, or new loans signed during the quarter.

Loan originations rose 41 percent from a year ago, to $589.7 million, which Jefferson Harralson, of Keefe, Bruyette & Woods said became “more optimistic” and could offset some of the recent worries about Lending Club’s business.

“There is some optimism that investors appear to be returning to the platform after a hiatus,” Harralson said. “There is some negative shock value to the CFO leaving, but the relative healing of the funding base probably trumps the negative in time.”

Harralson also said Lending Club’s estimate for sales between $95 million to $105 million remains close to expectations and that it seems to have stabilized it investor base, with 15 of its top 20 investors having come back to its lending platform.

The Year of Bad News isn’t over for Lending Club, but if its sales and loan volume at least evens out, the company might have fewer negative headlines to report over the next five months.

Photo: The Lending Club logo appears above the post where it trades on the floor of the New York Stock Exchange. (AP Photo/Richard Drew)







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