Regulators Approve LendingClub + Radius
In February 2020, we announced our intent to acquire Radius Bancorp (“Radius”) and shared how we can grow and deepen our customer relationships with a marketplace bank. Today, I am thrilled to announce that we have received all the bank regulatory approvals necessary to complete our acquisition. We expect to close on or around February 1, 2021, subject to completion or waiver of the remaining customary closing conditions.
This is a transformative acquisition for the company and a watershed event for the industry that positions us to reimagine banking for everyday Americans. The customer benefits of this acquisition are even clearer now that COVID has accelerated Americans’ move to digital banking. As the only full-spectrum fintech marketplace bank, we will be able to provide new products and services to our members that will help them both pay less when borrowing and earn more when saving. By combining with Radius, we will create a category-defining experience that will also dramatically enhance the resilience and earnings trajectory of our business.
When LendingClub first launched in 2007, we promised to “transform the banking industry.” Since then, we have solved the loan side of the equation. We took an existing financial product, the installment loan, and redefined the category. By bringing it online, leveraging technology and data, and building a marketplace model, we’ve made access to credit easier and fairer. Personal loans are the fastest growing category in consumer credit with more than 20 million Americans now holding one. By 2019, we became the largest personal loan company in America. To date, we have facilitated more than $60 billion in loans, helping more than 3 million members save billions of dollars by helping them refinance higher-interest credit card debt.
But there is still so much more to do. Our customers tell us that even after they’ve started to find savings through our platform, they still struggle to effectively manage their cashflow and as a result they end up paying hundreds of dollars in fees, most notably overdraft and monthly fees, to the banking providers with whom they do business. That makes it challenging for them to save. Being able to pay off debt and manage cash flow in order to save are the two critical behaviors that can help advance consumers’ financial health, and we will now be able to solve this for millions of existing and new customers.
We know that consumers are ready and eager for a new kind of financial relationship.
In a recent LendingClub survey of our members:
80% told us that they would trust us with more of their financial needs
69% think it would be helpful to have their loans and banking in one place
77% use their bank debit card for everyday spending, and
79% said they would be likely to open a checking account with us if we offered rewards linked to helping them pay off their LendingClub loans.
Together, we can make that possible – along with so much more.
A Full-Spectrum Fintech Marketplace Bank…At Scale from the Start
When combined with Radius, we will be well positioned to take advantage of two emerging trends that have accelerated due to COVID:
Eschewing physical banking in favor of digital experiences.
An aversion to the trap of revolving debt that traditional credit cards represent.
Now is the time for a new type of digital-first, branchless bank that truly aligns the customers’ best interests with our own. Beyond being the first neobank that is publicly traded in the U.S., we will be the only full-spectrum fintech marketplace bank at scale.
In other words:
Full-spectrum: Offering consumer and commercial loan products across the credit spectrum as well as a full suite of deposit products; enabling an inclusive brand with efficient marketing
Fintech: Digital-first with limited legacy physical infrastructure, which allows us to innovate quickly within a low-cost operating model.
Marketplace bank: The only bank with a built-in marketplace, allowing us to serve a broad range of customers without the use of the balance sheet while generating income to further improve our financial profile.
At scale: A national footprint with an immediate opportunity to serve the existing 3 million LendingClub loan members and all of Radius’ personal, commercial, and fintech clients on day one.
Why does this matter? Our combined entity will generate higher revenue at a lower cost than a traditional bank, which often has to support large operating infrastructures, enabling us to pass even more value on to members. Since we’re not trapped by legacy systems and practices, we’ll be able to innovate and move quickly to meet emerging customer needs. This is something both LendingClub and Radius already proved during our responses to the economic effects caused by COVID last year. Being digital-first means we’re well positioned to deliver on evolving consumer expectations of their financial institutions going forward.
What won’t change is our commitment to financial health.
The acquisition is a perfect marriage of two digital innovators that will allow us to create a new business model at scale that reimagines banking to pass even more value on to our customers.
Here is some of what we expect to deliver:
What You Can Expect from LendingClub
A true member experience.
LendingClub’s members today are credit worthy with relatively high-income levels but they make significant use of revolving credit cards to manage their cashflow and unforeseen events and are looking for additional ways to improve their financial health, including through banking services.
Now with Radius, we’ll be able to help them even more with an award-winning checking product that includes a rewards debit card that motivates people to abandon their credit card dependence and encourages positive behavior on their LendingClub loan. Our bank will also be able to offer our members great returns on their deposits too. This will be especially attractive in the low-interest-rate environment we expect to be in until at least 2022. The first product we plan to launch will be a high yield savings account for our retail investors soon after we close the acquisition.
Perhaps most importantly, checking accounts drive high consumer engagement, with people often logging in multiple times a week and this will give us a platform for ongoing opportunities to serve our members. The data and opportunity for additional interactions will allow us to understand our members much more deeply; enable us to provide even more value by saying “yes” to more people; and identify and present additional opportunities for more savings.
A strong market for loan investors.
The marketplace will continue to be a key part of our business model. We already work with a broad range of institutional investors, including a wide array of banks and some of the largest money managers in the world. They are interested in the relatively short duration, high return asset that our loans represent. We continue to innovate on their behalf to make this asset class even more attractive, such as our industry-first electronic trading platform LCX.
New opportunities for commercial customers.
The Radius commercial customer base opens new options for the combined entity to explore, including potential opportunities to offer personal loan benefits to trade union partners and their members (a core client base of Radius), new lending options to commercial customers, and much more. At the same time, we’ll leverage our scalable and robust marketing and consumer brand value proposition to the benefit of our commercial customers.
A new era of growth and profitability.
This transaction brings together the two sides of a bank balance sheet at scale and two strong customer bases that present compelling opportunities for future growth. LendingClub brings the leading digital asset generation platform and loan marketplace capabilities, and Radius contributes a leading online deposit gathering platform and additional banking expertise.
That combination is financially transformative.
First, it will diversify and increase earnings by capturing the sizeable dollar opportunity that LendingClub is currently paying to issuing banks.
Second, we will replace higher-cost warehouse lines with lower cost deposits.
Third, we will generate incremental and recurring net interest income from loans.
And finally, leveraging the benefits of both the marketplace and bank model will give us the flexibility to respond and grow in a variety of market conditions.
This acquisition brings together two digital innovators with complementary businesses. Together, we will have the scale, expertise, competitive advantages, and business model to usher in a completely new era of banking where our interests and those of our customers are completely aligned.
We can’t wait to get started so that we can unlock even more value for members and investors.
Scott Sanborn, CEO
Safe Harbor Statement
Some of the statements above, including statements regarding our ability to close the pending transaction with Radius, the timing and ability to realize certain financial and strategic benefits from the transaction, the interest rate environment, customer preferences and future products and services, are "forward-looking statements." The words "anticipate," "believe," "estimate," "expect," "intend," "may," "outlook," "plan," "predict," "project," "will," "would" and similar expressions may identify forward-looking statements, although not all forward-looking statements contain these identifying words. Factors that could cause actual results to differ materially from those contemplated by these forward-looking statements include whether all the closing conditions of the pending acquisition of Radius are satisfied, our ability to realize the anticipated benefits of the transaction with Radius and those factors set forth in the section titled "Risk Factors" in our most recent Quarterly Report on Form 10-Q and Annual Report on Form 10-K, each as filed with the Securities and Exchange Commission, as well as our subsequent filings made with the Securities and Exchange Commission, including subsequent reports on Form 10-Q and 10-K. We may not actually achieve the plans, intentions or expectations disclosed in forward-looking statements, and you should not place undue reliance on forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in forward-looking statements. We do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.Information in this blog post is not an offer to sell securities or the solicitation of an offer to buy securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction.