LendingClub(US:LC)2023-10-26 01:07Financial Data and Key Metrics Changes - Total revenue for Q3 2023 was $201 million, down from $232 million in the prior quarter and $305 million in the same quarter of the previous year [18] - Pre-provisioned net revenue (PPNR) was $73 million, compared to $81 million in the prior quarter and $119 million in Q3 2022 [17] - Net interest income was $137 million, down from $147 million in the prior quarter and up from $124 million in the same quarter of the previous year [19] - Non-interest income was $64 million, down from $86 million in the prior quarter and $181 million in the same quarter of the previous year [18] - Provision for credit losses was $64 million, compared to $67 million in the prior quarter and $83 million in Q3 2022 [23] - Net interest margin was 6.9%, down from 7.1% in the prior quarter and 8.3% in the prior year [20] Business Line Data and Key Metrics Changes - Originations were $1.5 billion, down from $2 billion in the prior quarter and $3.5 billion in Q3 2022 [16] - Approximately $500 million of originations were whole loans for the marketplace, primarily sold to asset managers [16] - The structured certificates program originated $450 million, showing strong demand [16] - Non-interest expense was $128 million, down from $151 million in the prior quarter and $186 million in the same quarter last year [21] Market Data and Key Metrics Changes - The company noted a significant reduction in bank investor participation, which historically comprised 50% of the marketplace [6] - The average sales price for loans sold was low-96s, indicating a 4-point discount [38] - The company has close to $2 billion of signed orders for structured certificates over the next six months [9] Company Strategy and Development Direction - The company is focusing on adapting its underwriting standards to the inflationary environment and maintaining prime originations [10] - A new structured certificates program was launched to attract asset managers and provide low-cost financing [7] - The company plans to enhance its mobile app to integrate loan servicing, spending, and savings [12] - The hiring of a Chief Customer Officer aims to improve marketing and customer engagement [14] Management's Comments on Operating Environment and Future Outlook - The operating environment remains challenging, particularly on the investor side, due to banking turmoil earlier in the year [6] - Management expects a modest increase in originations for Q4, with a range of $1.5 billion to $1.7 billion [27] - The company anticipates PPNR to range from $35 million to $45 million for Q4 [27] - Management expressed confidence in the company's ability to remain profitable and preserve shareholder capital while investing in new capabilities [28] Other Important Information - The company has a strong capital position with a Tier 1 leverage ratio of 13.2% and a CET1 capital ratio of 16.9% [26] - Total assets increased to $8.5 billion, reflecting a shift towards more securities from structured certificates [25] - The company has $1.3 billion in cash on hand and substantial unused borrowing capacity of approximately $3.8 billion [26] Q&A Session Questions and Answers Question: What is the dollar amount of the additional true-up for the held for investment portfolio? - The additional provision taken on the back book was about $20 million between the two vintages [31] Question: Is there irrational pricing by competitors affecting volume? - The dominant issue is the investor supply of capital, with competition in lower FICO bands lessening [34] Question: What percent of par were loans sold at in Q3? - The average sales price was low-96s, indicating a 4-point discount [38] Question: What is the outlook for marketing expenses? - Marketing expenses are expected to remain consistent with current levels, assuming the same marketing efficiency [46] Question: Can you clarify the structured certificate program's buyers? - The buyers include both existing partners and new partners, with significant capital to deploy [73]