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LendingClub (LC) Q4 Loss In Line, Revenues & Costs Decline

·4 min read

LendingClub Corporation LC recorded an adjusted loss per share of 24 cents in fourth-quarter 2020, in line with the Zacks Consensus Estimate. In the prior-year quarter, the company recorded adjusted earnings of 8 cents per share.

Results were primarily hurt by a decline in revenues. Moreover, the quarter witnessed lower loan-origination volumes. Nevertheless, lower expenses supported results to some extent.

After taking into consideration non-recurring items, GAAP consolidated net loss was $26.7 million against net income of $0.2 million in the year-ago quarter.

In 2020, the company reported an adjusted loss of $1.53 per share, in line with the Zacks Consensus Estimate. However, the figure compared unfavorably with adjusted earnings per share of 2 cents recorded in 2019. Consolidated net loss was $187.5 million compared with $30.7 million in 2019.

Revenues & Expenses Decline

Total net revenues in the reported quarter were $75.9 million, down 59.7% year over year. The fall was mainly due to a significant decline in transaction fees. The reported figure lagged the Zacks Consensus Estimate of $78.9 million.

In the year, total net revenues were $314.7 million, down 58.5% from 2019. Also, the top line lagged the Zacks Consensus Estimate of $317.7 million.

Total quarterly operating expenses were $102.9 million, down 45.3% year over year. The decline was due to a fall in all cost components.

Adjusted EBITDA was $3.9 million compared with $39 million recorded in the prior-year quarter.

In the December-end quarter, loan originations were $912 million, down 70.4% year over year.

As of Dec 31, 2020, cash and cash equivalents were $525 million, up from $243.8 million on Dec 31, 2019. Loans held for investment at fair value were $636.7 million, down 41% from Dec 31, 2019.

As of Dec 31, 2020, total stockholders’ equity was $724.2 million, down from $900.2 million recorded as of Dec 31, 2019.

Guidance

Concurrent with the results, management provided guidance for first-quarter and full-year 2021.

First-Quarter 2021

Loan originations of $1.2-$1.3 billion are expected. Net revenues are projected to be $87-$95 million and GAAP net loss is expected to be $75-$85 million.

Full-Year 2021

Loan originations are expected to increase 45% year over year while net revenues are expected to grow 55%. GAAP net loss of $175-$200 million is expected.

LendingClub Closes Radius Bank Deal

In February 2021, LendingClub completed the acquisition of Boston, MA-based online bank — Radius Bank — thus, becoming the first fintech firm to buy a bank. Founded in 1987, Radius Bank has more than $14 billion in assets. Notably, the stock-cum-cash deal is expected to be significantly accretive with a cash payback of the purchase price premium and all costs within two years.

Our Take

LendingClub’s revenues are expected to improve in the near term on strong loan originations. The acquisition of Radius Bank is expected to further support profitability. However, declining loan balances remain a headwind and might hurt financials.

LendingClub Corporation Price, Consensus and EPS Surprise

LendingClub Corporation Price, Consensus and EPS Surprise
LendingClub Corporation Price, Consensus and EPS Surprise

LendingClub Corporation price-consensus-eps-surprise-chart | LendingClub Corporation Quote

LendingClub currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Finance Stocks

CIT Group Inc.’s CIT fourth-quarter 2020 adjusted earnings per share of $1.50 hugely surpassed the Zacks Consensus Estimate of 54 cents. In the prior-year quarter, the company recorded earnings of $1.27 per share.

Hercules Capital Inc.’s HTGC fourth-quarter 2020 net investment income of 37 cents per share surpassed the Zacks Consensus Estimate of 33 cents. However, the bottom line declined 2.6% from the year-ago reported figure.

Ares Capital Corp.’s ARCC fourth-quarter 2020 core earnings of 54 cents per share surpassed the Zacks Consensus Estimate of 40 cents. Moreover, the bottom line reflects a rise of 20% year over year.

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