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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

DateFirmActionFromTo
Dec 2017Compass PointUpgradesSellNeutral
Nov 2017Canaccord GenuityMaintainsBuy
Nov 2017OppenheimerMaintainsOutperform

View More Analyst Ratings for LC
View the Latest Analyst Ratings

Posted-In: Morgan StanleyAnalyst Color Reiteration Analyst Ratings

 

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