What happened
For the week, shares of the digital marketplace bank LendingClub (LC +2.75%) traded nearly 12% higher as of 3:24 p.m. ET Thursday for no obvious reason other than the broader rally among tech and fintech stocks in recent days.
So what
LendingClub is largely in the business of using technology and machine learning to originate online personal loans, largely to prime borrowers.
The company, founded in 2006, transformed its business model when it completed the acquisition of Radius Bank early in 2021, which effectively made LendingClub a bank.
The acquisition has enabled LendingClub to use deposits to fund a portion of its loans, originate loans inside the company, and set up a better framework for putting loans on its balance sheet and collecting monthly, recurring-interest income.
NYSE: LC
Key Data Points
The model has quickly ramped up profitability for LendingClub, which generated record net income and revenue in the first quarter of 2022.
But like most tech and fintech stocks, LendingClub has sold off intensely this year, with the stock down more than 42% this year. The company has bounced this week along with the rest of the sector as investors seem to be shifting their sentiment positively in regards to inflation, the economy, and future interest rate hikes
Now what
I've liked LendingClub for a long time now. The company has the power of a fintech, with its ability to originate large numbers of loans and now with the stability of a bank as well.
This provides the company with a more stable source of funding with deposits. LendingClub also lends heavily to a much more resilient customer base that will likely hold up better than others if there were to be a recession.
LendingClub will report second-quarter earnings next week, and I'm fairly optimistic about the quarter.
