LendingClub Performance in Regard to ‘Bad Loans’
We respectfully disagree with your characterization of charge-off rates on the LendingClub platform in “Online Lender’s New Issue: Bad Loans” (Money & Investing, July 12). The article fails to note that lower-graded loans, which have experienced higher charge-off rates, represent just 25% of the company’s standard program loan volume, while 75% of standard program loan volume has exhibited stable performance.
We believe the single most critical factor in the discussion of performance is net returns to investors. Our expectation of performance on the loans you have singled out is a net annualized return of roughly 5%. Based on the steps we have taken to improve performance, which aren’t mentioned in the article, we anticipate the performance of any future loans in this subset to be more than 8%. We believe that in the current low-yield environment, LendingClub platform performance continues to compare very favorably with available alternatives. For example, the Barclays U.S. Aggregate Bond Index returned 1.96% for the year ending March 31.
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