Bloomberg Audio Studios, podcasts, radio news.
We promised you that we were going to continue on the US economy and really the US consumer, the online lending marketplace and platform for loans, credit cards, deposit accounts, insurance, and where we're talking about Lending Club. They announced one hundred million dollars share buyback just about one month ago. It was about fifty not fifty, nearly five percent of
the company's market value on the day of the announcement. Now, Atlas have been raising their price targets on the stock this year, most recently again raising them since the company reported earnings late October. The company posted third quarter results that beat estimates. They provided a guidance range for new fourth quarter originations with a midpoint above estimates. And the stock it's actually up this year.
Yeah, it is. Shares of the two point one billion dollar market cap company about fourteen percent of more than twelve percent since reporting those earnings back on October twenty second. Delighted to have with us Scott Sanborn, CEO of Lending Club, also CEO for close to a decade at Lending Club for fifteen years now also with us here in the Bloomberg BusinessWeek studio. Herman Chan a Bloomberg Intelligence senior analysts
for US regional banks. He helped bring all of this together, Scott, I want to start with you and just give us some size and scope of the business, the consumers that you're working with, who's interacting with the platform.
Yeah, So we serve a customer base we call the middle majority. They are if you think about credit, which we are a credit centric bank. If you've got a lot of money, you don't need a lot of access to credit. You pay cash for car, you save up to send your kids to college. If you're on the other end of the spectrum, you can't really access credits. So there's this middle group that are high income, heavy
users of credit. So they can afford a car, they can afford to send their kids to school, but they need to use credit to do it. That's who we serve. It's a really big customer base. It represents about a third of the US population, but it's close to half of the credit wallet. So they are more likely than average to have every form of credit, and that credit is with the exception mortgages, also larger than average. That's what we serve.
How much do these people usually make our average.
And you know, obviously misleading averages can be misleading. But average is about one hundred and twenty five thousand dollars. But you can think of it of ranging between call it eighty thousand dollars in individual income to about two hundred thousand is where we really over index.
Great. One of the real highlights of your recent investor day last we last month was the panel discussion with Marketplace investors, and we talked about this earlier before your appearance here on radio. One of the panelts talked about being aligning performance expectations partnering with better operators. Are you seeing that with the private private credit space.
Yeah, we do. So.
You know, we were born as a marketplace. Initially, everything we originated we sold. When we acquired the bank in twenty one, we started to hold a portion of our loans on our balance sheet. That both gives us a stronger and more resilient earnings profile also allows us to do other things innovate using our balance sheet. And what we found is just by aligning our interest with our loan buyers, we're the largest eater of our own cooking.
We're the largest holder of lending club loans We care very deeply about the performance of the credit and credit is always evolving. It's very dynamic. Because we have a balance sheet, what we can do is when we want to test something new, we test it on our balance sheet. Let's try longer duration, let's try a larger loan size, let's try a new marketing channel. We hold that first, own it, we own it, we make sure it performs the way we expect, and then we release that to
the marketplace. If you don't have a balance sheet, you can't really do that. And so that's visible in our results across every aspect of underwriting. So lower delinquencies than the rest of the industry thirty or forty percent below, lower roll rates, higher recovery rates, lower prepayments, lower fraud, literally every aspect that you can measure of credit out performing on.
Has that remained consistent this year, in recent months, in recent weeks, like you have a great real time view of the consumer in the form of how well they are doing in terms of paying back their loans. That's right, still looking good.
Yeah, So that's been consistent for you know, we release four years of data we put out there, and so it's remained consistent but you know it's not it's kind of like a duck on a pond. It's remained consistent because we're doing a lot of work underneath the cover. So you know, something that we shared an investor day is, at any given time, we have more than two hundred tests in the market where we're evaluating price points changes
to the credit. So we're constantly adjusting to reflect what's happening with the consumer, and that's what's giving us the consistent results.
Well, so that to me says you're very picky about who you lend to.
That's true.
We are so in terms of your test. So tell me what it is I mean, and how many of people who apply or want to access your platform. You're like, I'm out.
Yeah. So we're pretty good at selecting who we want to have in our portfolio and reaching out to those people and then both delivering the price and product experience, but also, let's call it the user experience that gets them all the way through. So we look for areas where, for example, we can control the use of the fun proceeds. If you come to me and say I want twenty thousand dollars because I'm going to do whatever my kid
needs braces, or I'm moving cross country. Great, but unless I'm paying the orthodontists, I don't actually know that that's what you're using it for. Yeah, So we try to set ourselves up so that we are in some ways controlling the use of proceeds and then making the experience such that it makes it really easy. So our largest use cases for people who already have debt, credit card debt, most notably, which at this point more than half of
all Americans are carrying. They're carrying it at really high rates to three percent interest rate. It's highest they've ever been in history. And we say, great, you should do this instead. It takes less than five minutes. We're going to save you seven hundred basis points. And by the way, check all the credit cards that you have that you want us to pay off, like we see you have Chase or a cap On. Great, check those and we're going to pay them directly, so we know you are
paying off your credit card debt. You're not just saying you're going to pay off your credit card debt and taking out more money. We are paying it off for you. Benefit for you is you know you've consolidated everything into one bill. Other benefit is your FYCO score usually goes up by thirty thirty five points, right, because you've lowered, you know, your your utilization.
How much can you lower? Like I'm going to tell you. Credit card rates just blow my mind about how high they are. And I'm just curious, why are they so high? Are people so bad? Is it to cover? No, I'm curious.
Yeah, No, it's a great question.
It just seems like it's out of control, and I think it prevents people from becoming financially solvent or creating, you know, kind of getting ahead of the game if you will.
Yeah. Yeah, there's a lot to unpack in that.
It is.
No, No, it's a great question, and you know there's a number of questions underneath. But I'd say the biggest thing is if you think about how people choose credit cards, it is not based on the interest rate. Yeah right, it's my Skymiles card or whatever, my retail store card. I'm going to get rewards for this. They don't even know what the interest rate is, or it's a promotional rate that resets, so that's one they don't choose based on that. Half of the people don't revolve on the
card they're collecting these rewards. Yeah, but they're not carrying a balance. Well, guess who's paying for that? All the people that are carrying a balance. Those people don't know what their rates are. The research we've done is half of all customers don't say they don't know the interest rate on their credit cards, and half that say they do. More than half of them are wrong, right. They think
they know their rate, but they don't. And so cards have been able And one of the big resets with the cards was was driven by the car Act, which limited how much cards could increase rates, so they factored in higher rates.
I just want to jump in real quick. We are speaking with Scott Sandborn, CEO of a lending club. He's been CEO for close to a decade. We're also just getting some breaking news too on Apple. Apple's design executive Alan Dye poached by Meta in at major coup This is the most prominent design executives executive at Apple. This underscore is a push by the social networking giant into AI equipped consumer devices. We also have here with us
Herman Chan. He's Bloomberg Intelligence Senior analyst for US regional banks.
Thanks.
I wanted to follow up with you, Scott on some of the medium term expectations you laid out an investor day. You talked about doubling loan originations. We're talking about eighteen to twenty billion dollars a year. What are some of the levers to get you to that level? You mentioned use cases. Maybe you talk about home improvement as a use case, and how do you maintain solid credit quality as you ramp.
Up that home improvement is something you're getting into, right.
That's right, yep. So first and foremost is as I mentioned, you know, credit card refinding people out of their credit card debt into a fixed rate, lower rate loan is number one use case. It's it's about eighty percent of what we do. That market is the largest it's ever been. There's one point three.
Trillion eighty percent of what you do. Is that? Wow? Go ahead?
Sorry?
So that is you know, one point three trillion in balances priced at really really high rates. We you know, when the rate environment shifted and the inflationary pressure shifted, we pulled back on a lot of our marketing. So we're currently running today at sort of below our historical volumes. So we're just going back into that market turning back on marketing channels that we had turned off, and then
the other areas. You know, personal loans can be used literally for anything, right and before credit cards came around and came to be, they were the dominant way consumers accessed you know, credit for everyday need. So we have a major purchase and business that's growing today, call it
fifty plus percent year on year. That's allowing things like elective medical procedures, you know, lay six races for your kid, you know, all kinds of procedure of fertility treatments, teeth implants, so things that insurance doesn't pay for but you want to do and you want to do right away. Private school education it's another one. So home improvement is sort of an next adjacency. People right now are staying in their homes longer. You know, seventy five percent of Americans,
their mortgage rate is under five percent. They're not going anywhere, and the homes are getting older. So the homes need to be invested in, they need to be improved. So effectively enabling home improvement through an unsecured loan, where again we are controlling the use of proceeds. We can pay the supplier we can pay the contractor. We've got the capability through an acquisition we announced to you know, disperse this in phases to multiple parties. So we're really excited to kick that off.
We've only got like thirty seconds left. Hair consumer doing okay.
I'd say the consumer we serve is demonstrating themselves to be remarkably resilient.
That a lot.
It's a drinking game, but we'll acknowledge that the sentiment isn't great.
Yeah, come back soon. I have to tell you that I think we're all like, I want to go, I want to go. Please come back late, because I think you have a great advantage and view into what's going on in the economy. We'd love to Okay, we would too. Scott Sandborn, chief executive officer of Lending Club, are amazing. Herman Chen Bloomberg, Intelligence Senior Analyst for US regional banks