Goldman Sachs Lowers LendingClub's Loan Origination Growth Estimates By 9%

Goldman Sachs’ Heath P. Terry mentioned that third party aggregation of LendingClub Corp LC's loan prospectuses indicates that loan origination has declined in 2Q.

Terry maintains a Neutral rating on the company, while lowering the price target from $4.40 to $4.30.

Declining Growth

“According to ThinkNum’s aggregation of LendingClub’s SEC filings of loan offerings over the quarter, LC reached $1.5 billion of standard loan offering volumes in 2Q16 to date, down 17 percent yoy vs. +44 percent in 1Q,” the analyst stated.

The company’s June-to-date loan offerings have decline 4 percent year-on-year, as compared to a decline of 53 percent in May and growth of 14 percent in April.

Related Link: LendingClub Loan Demand Still Lagging

“The loan prospectus data provides an indication of loan origination growth via the standard loan program, or approximately 76 percent of originations in 1Q,” according to the Goldman Sachs report.

Estimates Reduced

Terry has accordingly lowered the 2Q loan origination growth estimate from the earlier 14 percent to 5 percent year-on-year, to reflect the slower than anticipated standard loan growth.

“Beyond 2Q, while our estimates reflect a recovery in loan demand over time, we expect investors will wait for sustainable proof of that recovery and incremental disclosure from management before LC’s multiple reflects it,” the analyst said.

The 2016–2018 revenue and adjusted EBITDA estimates have been lowered to reflect the slowdown in loan origination growth in 2Q and the subsequent decline in profitability.