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What Does LendingClub's Deal With Citi Mean?

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In a report published Thursday, Morgan Stanley analysts maintained an Equal-Weight rating on LendingClub Corp (NYSE: LC), after the company announced the launch a $150mn community lending program to help Citigroup Inc (NYSE: C) issue qualifying Community Reinvestment Act loans.

According to the deal, which is to issue CRA loans to low and middle-income families, LendingClub will originate the loans and also sell them to a $150mn investment vehicle funded by investment firm Varadero (first loss position) and Citi (senior debt position).

The company indicated that this structure provides a "win-win that benefits both LC (satisfied borrowers with lower rates) and Citi (ability to easily lend to a structure and satisfy CRA requirements)." "We see this investment structure as a de facto pilot program, which could lead to agreements with other large banks should it prove to be successful," the analysts said.

LendingClub's guidance already reflects the impact of this partnership; therefore the deal does not "provide any incremental origination volume to our 2015 estimates," the analysts stated, while adding, "This is, however, a meaningful announcement given this is the first partnership between LC and a top 5 bank, and could signal a growing willingness among the incumbents to partner with LC in innovative ways."

Latest Ratings for LC

Oct 2016WedbushInitiates Coverage OnUnderperform
Oct 2016WedbushInitiates Coverage OnUnderperform
Aug 2016CitigroupMaintainsNeutral

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Posted-In: Morgan StanleyAnalyst Color Reiteration Analyst Ratings


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