LC loan performance not getting better

[Fred93]

I want to begin with LendingClub's most recent statements about loan performance, then show you recent data, and let you decide whether LC's statements are reasonable or misleading.

From the 10K for the year ended 12/31/2017,
Quote

[Rob L]

Very nice work as always!

What I find most troubling in the chart is the strong uptick in charge off rates in 17Q2 for MOB's 6, 7 and 8. If this were a downtick of the same magnitude there would be cause for some optimism. Coupled with rate increases lenders might once again stand a chance of making acceptable returns (knowing beauty is in the eye of the beholder). But such is not the case.

Perhaps LC's "near death experience" in 16Q2 could explain the rationale for the dropping charge off rates in 16Q4 and 17Q1. The 17Q2 data are not available for MOB's 9 and 10 so we will have to wait a couple of months to see how they look at those ages. Meanwhile it appears LC has reversed course and lowered its grading standards, probably to garner more originations at the expense of its lending community.

When LC started out banks were simply not lending and LC had the field mostly to itself. The Fed's ZIRP forced hoards of savers to reach for yield anywhere it could be found, providing LC an almost limitless source of money to lend. When you have a virtual monolopy you're usually pretty successful. Fast forward to the current and borrowers have many options. LC faces competition today like it's never faced before.