LendingClub Announces Acquisition Of Radius Bank

Lending ClubLendingClub (NYSE:LC) announced that it has signed a definitive agreement to acquire Radius Bancorp, and its wholly owned subsidiary Radius Bank, (together “Radius”) valued at 185 million USD. LendingClub says Combining Radius and LendingClub will create a digitally native marketplace bank at scale with the power to deliver an integrated customer experience, enabling consumers to both pay less when borrowing and earn more when saving.

Radius is an online bank founded in 1987 and based in Boston, MA, with more than 1.4 billion USD in diversified assets. Its platform provides features such as check deposit, bill pay, card management, and a personal financial management dashboard, as well as open APIs to offer “banking-as-a-service” (BaaS) functionality to leading fintechs. In addition, the company offers commercial lending options for businesses, and treasury management services for pension funds, unions, municipalities, and non-profit organizations.

‘This is a transformational transaction that allows us to reimagine banking in a way that is free from legacy practices and systems and where the success of LendingClub is aligned with the success of our customers,’ said Scott Sanborn, CEO of LendingClub. ‘By combining with Radius, we will create a category-defining experience for our members that will dramatically enhance the resilience and earnings trajectory of our business.’

‘LendingClub has always been a fintech innovator, and I look forward to leveraging the strengths of both of our talented teams as we usher in a new era in banking,’ said Mike Butler, Radius’ President and CEO. ‘We are excited for our employees to operate our virtual banking platform with more resources and for our clients to gain access to an industry-leading lending product. This is a perfect marriage, with LendingClub bringing the leading digital asset generation platform, and Radius contributing a leading online deposit gathering platform, to position the combined company for long-term success.’

The combined entity expects to be substantially accretive with a cash payback of the purchase price premium and all costs in two years. The purchase price is subject to certain adjustments set forth in the definitive agreement, and the transaction is subject to regulatory approval and other customary closing conditions and is expected to close in the next twelve to fifteen months with benefits starting to materialize immediately after close.

Further, to facilitate compliance with federal banking regulations and prevent closing of the Radius acquisition being delayed or disrupted, the LendingClub Board of Directors has adopted a Temporary Bank Charter Protection Agreement, also known as a stockholder rights agreement, and approved a dividend distribution of one purchase right for each outstanding share of the Company’s stock as of March 19, 2020. The agreement is intended to deter stock positions in excess of certain thresholds set forth by the Federal Reserve under the Bank Holding Company Act. Specifically, it provides for the dilution of any person or group of persons who acquire:

(i) 25 percent or more equity interest in LendingClub or
(ii) 7.5 percent or more of any class of LendingClub’s voting securities. This threshold automatically increases to 10 percent as set forth in the agreement.

Anyone already above such thresholds is grandfathered in at their current levels. The agreement is effective immediately and will automatically expire on either the closing of the Radius acquisition or after 18 months, whichever is earlier.

Spanish Platform Comunitae Stops Operations Due to Fraud

Spanish platform Comunitae has stopped operations indefinitely due to fraud. Several SMEs hat placed fraudulent offers on the marketplaces. The management says this was helped by inside fraud and they have expelled a risk analyst and initiated legal action.

Comunitae was founded in 2008. The problem was detected this October. While no figure of the monetary damage was given, management says the default level caused was to high to continue as investor demand dwindled.

The platform might be forced to close. Continue reading

Zopa To Retire Safeguard Fund

P2P lending marketplace Zopa announed the plan to roll out the new IF ISA from June 15th to existing customers with target rates of up to 6.1% and also that from December 2017 new lending will not be subject to the Safeguard Fund.

Investors in Zopa Core will lend in the same risk markets as Access and Classic (A*-C) but will not be covered by the Safeguard fund. Zopa Core will offer a higher target return of 3.9% after fees and expected credit losses, as compared to 3.7% and 2.9% for Classic and Access.

The Classic and Access product offers will no longer be available for new customers, but existing customers can continue to lend through these products until 1st December, when they will be retired.

The Innovative Finance ISA (IFISA) will be launched in four phases:
1. The first stage (from 15th June) will be focused on existing customers who want to open a new IFISA (limit of 20,000 GBP) and lend through Core and Plus.
2. The second stage (1st July 2017 to 31st July 2017) will enable existing customers to sell their current loans and re-purchase similar loans in an IFISA wrapper. This will allow investors to retain Safeguarded loans in the IFISA. Any investing through new lending, or relending as capital is returned, will be onto Plus or Core only.
3. The third stage (from August 2017, but dependent on meeting demand for new IFISAs) will allow existing customers to transfer existing ISA investments with other providers to Zopa.
4. And finally, once we have met demands of existing customers, we will welcome investments from new customers.

From December 2017, new lending will not be subject to Safeguard. All loans that currently have this coverage will continue to receive it.

Zopa today says it initially introduced Safeguard in 2013 to deal with a tax anomaly that unfairly penalised peer-to-peer lenders. The fund was designed to ensure that investors only paid taxes on the net income they received from Zopa borrowers: and not bad debt. In 2015 the tax laws were updated enabling investors to claim for relief on losses from bad debt. As a result, the primary reason for Safeguard was removed.
However in 2013 the Zopa website claim differed: ‘Zopa has created the Safeguard in order for you to get back all your money plus interest – without having to worry about a borrower paying you back. The Zopa Safeguard was created to step in and give you back all the money owed to you.’

Last year, based on customer demand, the company introduced Zopa Plus product without Safeguard coverage. Plus has proven popular and since March 2017 Zopa have been operating a waiting list for new investors due to the very high levels of demand. Zopa says that retiring Safeguard will allow the platform to provide greater target returns than Access or Classic (2.9% and 3.7% respectively, versus 3.9% in Core and 6.1% in Plus).

Andrew Lawson, Zopa’s Chief Product Officer, said: “We’re proud of our 12-year track record of prudent lending and have always provided positive returns to our customers. Safeguard was introduced in 2013 to deal with a tax anomaly that had led to peer-to-peer lenders being unfairly penalised. Since winning our campaign to change the tax rules, we no longer need Safeguard – as customers have proved by flocking to Zopa Plus. Now it’s done its job, retiring Safeguard, allows us to provide greater expected returns to our investors (because on average we over-fund Safeguard) whilst making the investor products even easier to understand. We’ll continue to maintain Safeguard for the rest of its life, and continue to build on our reputation for world-leading credit risk management.”

Zopa with New Look

zopa-logo-2016Today Zopa launched a new design for the website and introduced a new logo, which I find very simplistic.

Zopa says:

This fresh new identity will give us a springboard for our ambitious plans to bring our products to even more UK consumers, and create radically personalised services that will help people fully realise their financial potential.

While a lot has changed – a bold new logo, icons, and tone of voice – our products still work in exactly the same way.

A year in the making

We started on this journey 12 months ago. In partnership with, KBS Albion, we took stock of who we were and where we wanted to be. We wanted to capture and build on our customer-focussed culture: ensuring that our borrowers’ and investors’ interests remain at the heart of what we do.

Our Values

Since we were founded in 2005, we’ve cultivated a dynamic, customer-obsessed culture. As part of our partnership with Albion, we defined our seven core values that guide and influence our behaviour and decisions:

  • We are customer-obsessed.
  • We are positive.
  • We are results-focussed.
  • We do the right thing.
  • We are bold.
  • We work as a team.
  • We strive to be the best.

Our new look and tone of voice have grown out of, and continue to reflect, these values; underscoring our commitment to being open and honest in how we look and sound.

Very first opinions voiced by investors on the new design are mixed.

Earlier this month, Zopa was the first pp lender that said it will (temporary) stop to accept new lender money. With this unprecedented move Zopa reacted to lender demand that is much higher than matching borrower loan requests. Zopa described the reasons in its investor communication:

Continue reading

Breaking: Zopa will Launch a Bank

P2P lending marketplace Zopa, the first p2p lending platform, established in 2005, announced today that it will launch a bank in 2018, offering FSCS protected saving deposits. This will not replace the p2p lending product, which will continue to operate.

Zopa CEO Jaidev Jardana says “We launched in 2005 to create a richer life for everyone by making money simple and fair. We have lent over 1.8 billion GBP and inspired a 100 billion GBP global industry. We have built a profitable, scalable and viable business. Yet we’ve only just begun. We want to launch a next generation bank to drive greater choice for borrowers, savers and investors, which is good for consumers and good for the economy. We are uniquely placed to re-define customer expectations of what a bank should deliver in the 21st century. Over the last 11 years we have delivered great value to borrowers and investors whilst prudently managing credit risk. Combining our pioneering data and tech-led culture with an obsession with fairness and customer experience, we are best placed to shape the future of personal finance in the UK.”

An announcement sent via email to investors reads:

I wanted to write to you, on behalf of everyone at Zopa, to share some important news.

We launched Zopa in 2005 to create a richer life for everyone by making money simple and fair. Since then, we have lent over 1.8 billion GBP, inspired a 100 billion GBP global industry and helped our lenders earn over 75M GBP of interest. We have built a profitable, scalable and viable business. Yet we’ve only just begun.

We want to offer consumers even more choice, which is why, subject to regulatory approval, we are planning to launch a next generation bank to complement our existing peer-to-peer products.

We will continue to offer our peer-to-peer investment products.

Launching a bank, to sit alongside our existing peer-to-peer business, will allow us to create new and innovative savings and borrowing products. At launch, Zopa will offer FSCS protected deposit accounts to savers and overdraft alternatives to borrowers.

As an existing Zopa customer, we will give you the first opportunity to try out our new products. We will also actively welcome your input as we shape them.

The application process should take about 15-24 months, and we will keep you updated when we have news to share.

We believe we are uniquely placed to re-define what you should be able to expect from personal finance products in the 21st century.

Over the last 11 years, we have built an innovative, profitable and well-managed business. We have proven that we can deliver great value to borrowers and investors whilst prudently managing credit risk.

We know how to originate quality loans seamlessly online and meet our risk expectations. No new bank has that track record, and no incumbent bank has the digital expertise that we do.

We put our customers at the heart of all our decisions and obsess over how we can use technology to offer you simple, smart choices. We are looking forward to offering more products to even more people in the UK.

For now, thank you for investing through Zopa. I look forward to sharing this exciting journey towards the next generation banking we all deserve

Zopa Runs Hackathon

Zopa is the first p2p lending marketplace to run a hackathon called Zopathon. Participants a challenged to code something ‘that makes interest rates more interesting’. I have seen several hackathons in the fintech space but usually they are organized by banks, service providers or accelerators and none were p2p lending specific. Zopa says they will introduce APIs, that can be used in the 24 hour event. Sign up for participants is here.

zopathan