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LC

LendingClub Corp (LC)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 delivered a clean beat on profitability: Pre‑Provision Net Revenue was $74.3M, above the $60–$70M guide, driven by improving loan sale pricing, a $400M seasoned loan sale to a new bank, and favorable marks; total net revenue was $217.2M and diluted EPS was $0.08 .
  • Originations were $1.85B (+13% YoY), while net interest margin dipped to 5.42% (management flagged this as the cycle low with improvement expected in coming quarters) .
  • Guidance points to reacceleration: Q1 2025 originations $1.8–$1.9B and PPNR $60–$70M, with an exit-run rate for Q4 2025 originations ≥$2.3B and ROTCE >8% as marketing channels are restarted and bank demand expands .
  • Structural catalysts into 2025: banks purchased ~one‑third of Q4 marketplace volume, loan sale prices have risen for 4 straight quarters (+170 bps YoY), and LC is pursuing rated structured certificates (first Fitch‑rated series closed Feb-13, 2025), all supportive of higher loan sale pricing and top‑line leverage .

What Went Well and What Went Wrong

  • What Went Well
    • Pricing and PPNR beat: PPNR of $74.3M exceeded the $60–$70M guide; management attributed the beat to strong execution, higher loan sale prices, the $400M seasoned sale, and favorable end‑of‑quarter marks .
    • Bank demand returned: Banks bought roughly one‑third of Q4 volume; consecutive price increases over 4 quarters (+170 bps YoY) validate credit outperformance and marketplace traction .
    • Member engagement/product: DebtIQ and TopUp increased engagement ~50% and boosted issuance ~25% among enrolled members; LevelUp Savings reached ~$1.2B, with ~70% of customers engaging in positive savings behavior, supporting lower funding costs and deposit growth .
  • What Went Wrong
    • EPS and NIM pressure: Diluted EPS fell to $0.08 (from $0.13 in Q3) amid a $63.2M provision (higher Day 1 CECL from HFI retention) and a $3.2M post‑tax non‑cash software impairment; NIM declined to 5.42% driven by higher cash mix following the $400M sale .
    • Marketplace origination mix: Total originations fell sequentially to $1.85B (from $1.91B) and marketplace loans decreased to $1.24B (from $1.40B) as LC retained more HFI loans, tempering immediate fee revenue .
    • Held‑for‑investment credit costs: Provision increased YoY to $63.2M due to stepped‑up HFI retention; ex‑recoveries, the net charge‑off rate would have been 4.9% (reported 4.5%), highlighting residual credit cost sensitivity despite improving trends .

Financial Results

MetricQ4 2023Q2 2024Q3 2024Q4 2024
Total net revenue ($MM)$185.6 $187.2 $201.9 $217.2
Diluted EPS ($)$0.09 $0.13 $0.13 $0.08
Net interest margin (%)6.40% 5.75% 5.63% 5.42%
Pre‑Provision Net Revenue ($MM)$55.6 $55.0 $65.5 $74.3
Non‑interest expense ($MM)$130.0 $132.3 $136.3 $142.9
Provision for credit losses ($MM)$41.9 $35.6 $47.5 $63.2
Net income ($MM)$10.2 $14.9 $14.5 $9.7

Segment/Revenue Components

MetricQ4 2023Q2 2024Q3 2024Q4 2024
Non‑interest income ($MM)$54.1 $58.7 $61.6 $74.8
Net interest income ($MM)$131.5 $128.5 $140.2 $142.4
Marketplace revenue ($MM)$52.2 $56.4 $58.4 $72.2

Key Performance Indicators (KPIs)

KPIQ4 2023Q2 2024Q3 2024Q4 2024
Total originations ($MM)$1,630 $1,813 $1,913 $1,846
Marketplace loans ($MM)$1,432 $1,477 $1,403 $1,241
HFI originations ($MM)$198 $336 $510 $605
HFI as % of originations12% 19% 27% 33%
Marketing expense as % of originations1.44% 1.47% 1.37% 1.27%
Total deposits ($MM)$7,333 $8,095 $9,460 $9,068
Total assets ($MM)$8,827 $9,586 $11,038 $10,631
Net charge‑off ratio (%)6.6% 6.2% 5.4% 4.5%

Notes:

  • Q4 2024 diluted EPS includes a post‑tax $3.2M non‑cash impairment related to internally developed software post‑Tally acquisition .
  • Management indicated NIM should improve from Q4’s 5.42% low as funding costs fall and cash mix normalizes .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent Guidance/ActualChange
Loan originations ($B)Q4 2024$1.8–$1.9B (given in Q3 release) $1.85B actual Result above midpoint
PPNR ($M)Q4 2024$60–$70 (given in Q3 release) $74.3 actual Beat
Loan originations ($B)Q1 2025N/A$1.8–$1.9B New
PPNR ($M)Q1 2025N/A$60–$70 New
ROTCE (%)Q4 2025 (exit)N/A>8% New
Net interest marginNear‑term outlookN/A5.42% in Q4 (expected low point), improvement anticipated Outlook improved
Marketing expenseQ1 2025N/AIncrease to support re‑opening acquisition channels Higher spend signaled

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024 and Q3 2024)Current Period (Q4 2024)Trend
Loan sale pricing & bank buyersPipeline of banks returning in H2; price lift ~20 bps QoQ; structured certificates scaling 4 consecutive quarters of price increases (+170 bps YoY); banks ~1/3 of Q4 volume; >$1B anticipated bank flows; rated product to further tighten spreads Improving
Product innovation & engagementMobile app rollout; DebtIQ early phase; TopUp/CleanSweep performing well DebtIQ driving ~50% higher engagement and ~25% higher issuance among enrolled members; enhanced features slated for Q3 2025 via Tally IP Advancing
Funding costs & deposits (LevelUp)LevelUp launched; strong initial deposits; balance sheet expansion LevelUp reached ~$1.2B; deposit beta ~80% on repricing; exited highest‑cost commercial deposit; funding costs trending down Falling costs
Credit performanceNCO rate improved to 6.2%; delinquencies down; stable vintages NCO rate 4.5% (4.9% ex recoveries); dollar NCOs down YoY; consumer delinquencies improved Improving
Marketing re‑start & volume trajectoryReopening channels tied to price reaching mid‑to‑high 98s; testing expected in Q1 Testing to begin as LC exits Q1; exit‑2025 originations ≥$2.3B target Reaccelerating
Regulatory/operationalN/AExited new bank operating agreement on time; robust liquidity and capital Completed/solid

Management Commentary

  • “In the fourth quarter, originations were up 13% year-on-year… total net revenue came in at a high for the year, up 17% to $217 million.” (CEO) .
  • “4 consecutive quarters of increasing loan sales prices, up by 170 basis points year-on-year… marketplace loan demand is increasingly coming from banks who purchased roughly 1/3 of our volume in Q4.” (CEO) .
  • “DebtIQ… driving a nearly 50% increase in member engagement and a 25% increase in loan issuance for enrolled members… enhanced version… with credit card linking, automated payments, and contextual offers as we enter the third quarter.” (CEO) .
  • “PPNR was $74 million… above our guidance range… driven by strong execution and improved loan sale pricing as well as a few unique items [including] the previously mentioned $400 million loan sale… favorable marks.” (CFO) .
  • “Net interest margin was down slightly… at 5.42% as expected… we believe this will represent the low point.” (CFO) .

Q&A Highlights

  • Volume and pricing trajectory: Q1 volumes flat QoQ due to seasonality and disciplined credit; pricing expected to continue improving even without further Fed cuts, aided by mix of buyers and rated products .
  • Bank demand and mix: LC plans to grow held‑for‑sale inventory to support larger upfront bank purchases followed by programmatic flows; HFI retention to remain healthy but may be below the $605M Q4 level as mix evolves .
  • Funding costs: Deposit repricing saw ~80% beta to Fed cuts; exited a legacy high‑rate commercial deposit; LevelUp gathered ~$1.2B and >70% of customers engaged in monthly savings behavior .
  • Marketing spend: Q1 PPNR guide ($60–$70M) is lower than Q4’s $74M largely due to higher expected marketing spend as paid channels restart; Q1 consensus PPNR was noted at ~$73M on the call (context for near‑term expectations) .
  • Structured certificates/rating: Pursuing a rated senior tranche to broaden buyers (including insurers) and tighten spreads; first Fitch‑rated SLCLC series subsequently closed (Feb-13, 2025) .

Estimates Context

  • Wall Street consensus from S&P Global (Revenue, EPS) was unavailable at time of analysis due to data access limits; as a result, we cannot provide an apples-to-apples comparison versus consensus for Q4 2024. S&P Global consensus data was unavailable.
  • On the call, management cited that Q1 2025 PPNR guidance ($60–$70M) was “a little bit below consensus, $73M,” indicating near‑term sell‑side expectations for PPNR; this reference came from analyst Q&A rather than S&P Global data .

Key Takeaways for Investors

  • LC’s PPNR and revenue momentum are accelerating on the back of improving loan sale pricing and bank buyer re‑engagement; Q4 PPNR beat and successive price lifts de‑risk the path to reopening higher‑cost acquisition channels .
  • Near‑term margin headwinds (NIM 5.42% low point) look transitory; deposit beta to cuts, exit of high‑rate commercial deposits, and LevelUp engagement support funding cost relief in 2025 .
  • Credit trends are favorably inflecting (NCO ratio down to 4.5%) and should continue to support pricing and investor returns, even as LC maintains a tight credit box .
  • Structured funding optionality (rated SLCLC senior tranche) expands buyer universe and should tighten spreads further, lifting marketplace economics and top‑line capacity .
  • Expect higher marketing spend in Q1 to seed channel re‑activation; this may pressure near‑term PPNR versus Q4 actuals but is aimed at building volume into the seasonally favorable Q2/Q3 and the ≥$2.3B Q4 2025 exit target .
  • Product-led engagement (DebtIQ, TopUp, mobile app) is increasing issuance from existing members at low CAC, enhancing lifetime value and smoothing origination ramp‑up risks .
  • Tactical positioning: Near‑term volatility in PPNR is a tradeoff for medium‑term growth; improving pricing, bank flows, and funding costs form a credible setup for estimate revisions upward as execution on the marketing restart and rated products materializes .