Online lending platform operator Lending Club reported a smaller-than-expected loss and said an investor had agreed to buy $1.3 billion in loans, sending its shares soaring as much as 20%.
The company, which matches borrowers and lenders via an online marketplace, had been struggling to bring banks back to its platform following revelations of lending improprieties, the ouster of founder and ex-CEO Renaud Laplanche and a U.S. Department of Justice probe.
"Virtually all our bank partners are back," CEO Scott Sanborn said on a call on Monday.
National Bank of Canada will invest $1.3 billion to buy loans on the company's platform through its U.S. unit Credigy over the next 12 months, Lending Club said.
Banks accounted for 15% of origination volumes in September, Sanborn said, adding that Lending Club aimed to raise that ratio to 25% in the fourth quarter.
"We actively re-engaged with investors of all types to deliver on our plan and enable $2 billion in loan originations," Sanborn said.
Lending Club reported a net loss of $36.5 million, or 9 cents per share for the quarter. Excluding items, it lost 4 cents per share, compared with analysts' average estimate of a loss of 7 cents, according to Thomson Reuters I/B/E/S.
The results showed Lending Club's progress in revitalizing its business despite investor skepticism about its ability to rebound from the scandal, BTIG analyst Mark Palmer wrote in a note.
NOT OUT OF THE WOODS
Loan originations, a key metric indicating the volume of loans processed, fell 11.8% to $1.97 billion in the third quarter ended Sept. 30.
Lending Club raised interest rates for some of its loans this year and tightened its credit policy, resulting in some high-risk borrowers being denied loans.
It seems like Lending Club is being proactive and maintaining the ability to predict credit losses, but it's hard to say if this is enough, KBW analyst Jefferson Harralson told Reuters.
"I don't think they're out of the woods just yet."
The company's operating expenses jumped by nearly a third to $151.25 million.
Net revenue fell 1.5% to $114.56 million, beating estimates of $103.65 million.
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Lending Club said it expected a fourth-quarter net loss of $38 million-$48 million. That compares with a profit of $4.57 million a year earlier.
The company's shares (lc) were up 18.6% at $6.08 in afternoon trading. Up to Friday's close of $5.13, Lending Club's stock had fallen 53.6% this year.