Why Loan Funding And Credit Matter More Than CFO Exit For LendingClub

LendingClub Corp LC's announcement during its second-quarter earnings results that Chief Financial Officer Carrie Dolan resigned from the company represents a "negative shock value," according to Jefferson Harralson of Keefe, Bruyette & Woods (KBW), but there are other aspects of the business that are more important for investors.

LendingClub's loan origination in the quarter fell to $1.9 billion from $2.8 billion a year ago, but the fact that 15 of its top 20 investors (including Jefferies) returned to the platform may signify some stabilization in the business. In fact, the company's third- and fourth-quarter loan origination guidance of $1.9 billion each exceeds the analyst's prior outlook for just $1.7 billion in each quarter.

Related Link: BTIG Weighs LendingClub CFO Exit, Adjusted EBITDA Outlook Against Promising Loan Origination Growth

Harralson added that LendingClub's other positive developments include:

    1. The company beginning to cut expenses.
    2. Additional spend in "saving" the funding base by performing due diligence requests.
    3. The creation of incentive plans for investors to accelerate their activity.
    4. An increase to the rate the platform charges borrows — a move that "shone through in the quarter."

Bottom line, the analyst stated that "the relative healing of the funding base probably trumps the negative in time, in our view."

Shares remain Market Perform rated with an unchanged $5 price target.

Posted In: Carrie DolanJefferson HarralsonKBWLendingClubLendingClub Loan OriginationsAnalyst ColorNewsReiterationManagementAnalyst Ratings