Chapter 1: What insights does LendingClub CEO Scott Sanborn share about consumer credit?
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Bloomberg Audio Studios. Podcasts. Radio. News. We promised you that we were going to continue on the U.S. economy and really the U.S. consumer. The online lending marketplace and platform for loans, credit cards, deposit accounts, insurance and more. We're talking about Lending Club. They announced $100 million share buyback just about one month ago. It was about
50, not 50, nearly 5% 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 $2.1 billion market cap company, about 14%, up more than 12% since reporting those earnings back on October 22nd. Delighted to have with us Scott Sanborn, CEO of Lending Club, also CEO for close to a decade at Lending Club for 15 years now. Also with us here in the Bloomberg Businessweek studio, Herman Chan, Bloomberg Intelligence Senior Analyst for U.S. 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 a 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 credit.
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Chapter 2: How does LendingClub serve its customer base during the holiday season?
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 case is 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 23 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 gonna save you 700 basis points oh 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 one great check those and we're gonna 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've consolidated everything into one bill. Other benefit is your FICO score usually goes up by 30, 35 points because you've lowered your utilization.
How much can you lower? Like, I got 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, 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, right? It's my SkyMiles card or my whatever, my retail store card, I'm gonna 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, 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 say they don't know the interest rate on their credit cards, and the half that say they do, more than half of them are wrong. 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 Card Act, which limited how much cards could increase rates.
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Chapter 3: What factors influence the recent performance of LendingClub's stock?
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 vantage and view into what's going on in the economy.
We'd love to.
Okay. We would too. Scott Sanborn, Chief Executive Officer of Lending Club. Our amazing Herman Chan, Bloomberg Intelligence Senior Analyst for U.S. Regional Banks.
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